U.S. natural gas slips as exports decline, coronavirus demand destruction worries

(Reuters) - U.S. natural gas futures slipped for a fifth day in a row on Wednesday as pipeline and liquefied natural gas (LNG) exports declined and on long-term forecasts government steps to slow the spread of coronavirus will cut demand in coming months.

FILE PHOTO: Natural gas flares off at a production facility owned by Exxon near Carlsbad, New Mexico, U.S. February 11, 2019. REUTERS/Nick Oxford

Traders noted those price decline came despite a slowdown in output and short-term forecasts for cooler weather and higher heating use over the next two weeks than earlier expected.

Front-month gas futures for May delivery on the New York Mercantile Exchange fell 2.9 cents, or 1.8%, to $1.621 per million British thermal units at 8:12 a.m. EDT (1212 GMT), their lowest in over a week.

That puts the front-month down for a fifth day in a row for the first time since October. During that time, the contract has lost about 12%.

Even before the coronavirus started to cut global economic growth and energy demand, gas was trading near its lowest in years as record production and months of mild winter weather allowed utilities to leave more fuel in storage, making shortages and price spikes unlikely. During the first week of April, the front-month settled at its lowest since August 1995.

Looking ahead, gas futures for the balance of 2020 and calendar 2021 were trading much higher than the front-month on expectations demand will jump in coming months as the economy snaps back once governments loosen travel and work restrictions after slowing the spread of coronavirus.

The premium of futures for June over May rose to its highest since 2008 when the contracts started trading for a fourth day in a row, while calendar 2021 has traded over 2022 for 25 days and over 2025 for 15 days.

But with cooler weather coming in the short-term, data provider Refinitiv projected gas demand in the U.S. Lower 48 states, including exports, would reach 97.8 bcfd this week and 95.6 bcfd next week. That is higher than Refinitiv’s forecasts on Tuesday of 97.6 bcfd this week and 95.0 bcfd next week.

The amount of gas flowing to U.S. LNG export plants eased to 8.4 bcfd on Tuesday from 8.7 bcfd on Monday, according to Refinitiv. That compares with an average of 8.0 bcfd last week and an all-time daily high of 9.5 bcfd on Jan. 31.

U.S. pipeline exports to Canada fell to a 27-month low of 1.4 bcfd on Tuesday, according to Refinitiv, as Michigan started importing gas from Ontario on the Vector pipe for the first time since April 2018. That compares with an average of 2.5 bcfd last week and an all-time daily high of 3.9 bcfd on Jan. 25, 2018.

U.S. gas production, meanwhile, slipped to 92.6 bcfd on Tuesday from 93.5 bcfd on Monday, according to Refinitiv. That compares with an average of 93.2 bcfd last week and an all-time daily high of 96.5 bcfd on Nov. 30.

Reporting by Scott DiSavino; Editing by Nick Zieminski