May 6, 2020 / 2:02 PM / 2 months ago

U.S. natgas falls from 16-wk high on forecasts for lower demand and exports

    May 6 (Reuters) - U.S. natural gas futures fell over 6% on
Wednesday on forecasts for lower demand next week than
previously expected and longer-term projections that demand and
exports will drop in coming weeks due to government lockdowns to
stop the spread of the novel coronavirus.
    That price decline comes after gas prices jumped 13% to a
16-week high earlier this week on a sharp decline in output as
shale drillers shut oil wells due to the 60% collapse in crude
prices so far this year. Those oil wells also produce a lot of
gas.
    Front-month gas futures for June delivery on the New
York Mercantile Exchange fell 13.6 cents, or 6.4%, to $1.998 per
million British thermal units at 9:37 a.m. EDT (1337 GMT).
Tuesday's close was the highest since Jan. 14.
    Price increases earlier this week boosted the U.S.
front-month over the Title Transfer Facility (TTF) in the
Netherlands and the Japan/Korea Marker (JKM)
, making U.S. gas the most expensive of the world's major
benchmarks. That is why some liquefied natural gas (LNG) buyers
have canceled U.S. cargoes - because it would cost more to buy
gas in the United States than it could be sold for in parts of
Europe and Asia - and that does not include fees for shipping or
liquefaction.
    Most U.S. LNG, however, has already been sold forward years
in advance to utilities consuming the fuel, so U.S. cargoes will
likely continue to go to Europe and Asia.
    Traders noted the latest price moves marked the point at
which the spot market has finally caught up to the forwards
market since U.S. gas prices for the summer have been trading
over some European and Asian hubs for weeks.
    Those U.S. gas futures for the balance of 2020 and
calendar 2021 are trading much higher than the
front-month on expectations demand will jump once governments
loosen pandemic restrictions.
    The U.S. Energy Information Administration (EIA) projected
gas production will fall to an annual average of 91.7 billion
cubic feet per day (bcfd) in 2020 and 87.5 bcfd in 2021 from a
record 92.2 bcfd in 2019 as energy firms cut spending on
drilling.
    Data provider Refinitiv said gas output in the U.S. Lower 48
states has averaged 89.8 bcfd so far in May, down from an
eight-month low of 92.8 bcfd in April and an all-time monthly
high of 95.4 bcfd in November.
    The EIA projected coronavirus lockdowns will cut U.S. gas
use - not including exports - to an average of 83.8 bcfd in 2020
and 81.2 bcfd in 2021 from a record 85.0 bcfd in 2019.

    With slightly cooler weather coming, Refinitiv projected
demand in the Lower 48 states, including exports, would rise
from an average of 82.9 bcfd this week to 85.4 bcfd next week.
That compares with Refinitiv's forecasts on Tuesday of 82.5 bcfd
this week and 86.8 bcfd next week.
    Even though the coronavirus pandemic is reducing global gas
use, the EIA still expects U.S. exports to hit record highs in
the coming years as more LNG export plants and pipelines enter
service. Still, the agency has reduced its projections on the
pace of that growth due to the pandemic.
    Refinitiv said U.S. LNG exports averaged 7.0 bcfd so far in
May, down from a four-month low of 8.1 bcfd in April and an
all-time high of 8.7 bcfd in February.
                  
                                       Week ended      Week ended    Year ago   Five-year   
                                           May 1        Apr 24        May 1      average    
                                        (Forecast)      (Actual)                  May 1     
 U.S. natgas storage (bcf):                +92            +70          +96         +74      
                                                                                            
                                                                                            
 Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days                         
 Two-Week Total Forecast               Current Day     Prior Day    Prior Year   10-Year    30-Year Norm
                                                                                   Norm     
 U.S. GFS HDDs                             101            110           87          81           74
 U.S. GFS CDDs                              66             65           59          67           66
 U.S. GFS TDDs                             167            175          146         128          141
                                                                                            
 Refinitiv U.S. Weekly GFS Supply and Demand Forecasts                                      
                                        Prior Week    Current Week  Next Week   This Week    Five-Year
                                                                                Last Year   Average For
                                                                                               Month
 U.S. Supply (bcfd)                                                                               
                                                                                            
 U.S. Lower 48 Dry Production              91.9           89.8         89.9        88.9         77.0
 U.S. Imports from Canada                  5.9            5.9          6.4         7.7          7.8
 U.S. LNG Imports                          0.0            0.0          0.0         0.0          0.1
 Total U.S. Supply                         97.8           95.7         96.3        96.6         84.9
 
 U.S. Demand (bcfd)
 U.S. Exports to Canada                    2.8            2.6          2.6         2.5          1.9
 U.S. Exports to Mexico                    4.7            4.3          4.5         4.5          3.9
 U.S. LNG Exports                          7.5            7.3          7.5         5.5          2.0
 U.S. Commercial                           7.3            6.6          7.8         6.1          5.5
 U.S. Residential                          9.2            7.9          10.2        6.9          6.1
 U.S. Power Plant                          26.1           25.6         23.8        26.4         25.3
 U.S. Industrial                           22.2           22.1         22.6        21.9         20.6
 U.S. Plant Fuel                           4.5            4.4          4.4         4.5          4.5
 U.S. Pipe Distribution                    1.9            1.8          1.9         1.8          1.9
 U.S. Vehicle Fuel                         0.1            0.1          0.1         0.1          0.1
 Total U.S. Consumption                    71.5           68.6         70.8        67.7         64.0
 Total U.S. Demand                         86.4           82.9         85.4        80.2         71.8
                                                                                            
                                                                                            
 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)                                         
 Hub                                   Current Day     Prior Day                            
 Henry Hub NG-W-HH-SNL                   1.93           1.78                              
 Transco Z6 New York NG-CG-NY-SNL        1.63           1.68                              
 PG&E Citygate NG-CG-PGE-SNL             2.95           2.54                              
 Dominion South NG-PCN-APP-SNL           1.49           1.53                              
 Chicago Citygate NG-CG-CH-SNL           1.97           1.78                              
 Algonquin Citygate NG-CG-BS-SNL         1.76           1.63                              
 SoCal Citygate NG-SCL-CGT-SNL           2.23           1.98                              
 Waha Hub NG-WAH-WTX-SNL                 1.77           1.65                              
                                                                                            
 SNL U.S. Power Next-Day Prices ($ per megawatt-hour)                                       
 Hub                                   Current Day     Prior Day                            
 New England EL-PK-NPMS-SNL             20.00          16.75                              
 PJM West EL-PK-PJMW-SNL                23.48          21.25                              
 Ercot North EL-PK-ERTN-SNL             22.00          19.25                              
 Mid C EL-PK-MIDC-SNL                   16.64          15.92                              
 Palo Verde EL-PK-PLVD-SNL              20.00          20.25                              
 SP-15 EL-PK-SP15-SNL                   21.75          21.50                              
 
 (Reporting by Scott DiSavino)
  
 
 
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