May 12, 2020 / 7:01 PM / 21 days ago

UPDATE 1-U.S. natgas falls near 6% as mild weather and coronavirus cut demand

 (Adds closing prices, latest estimates from EIA)
    May 12 (Reuters) - U.S. natural gas futures fell almost 6% to a three-week low on Tuesday on
forecasts for demand to drop as the weather turns milder and businesses remain closed due to government
lockdowns to stop the spread of coronavirus.
    Those price declines, however, were limited by a continued slowdown in output as a global crude glut
and slumping fuel demand due to the lockdowns caused oil prices to collapse, prompting energy firms to
slash spending on drilling and shut oil wells. Those oil wells also produce a lot of gas.
    Front-month gas futures for June delivery on the New York Mercantile Exchange fell 10.6
cents, or 5.8%, to settle at $1.720 per million British thermal units, their lowest close since April
16.
    Since late April, the front-month at the Henry Hub benchmark in Louisiana has traded higher than the
Title Transfer Facility (TTF) in the Netherlands. Henry Hub futures were also
trading higher than TTF in July and August.
    Analysts said higher U.S. prices should prompt buyers of liquefied natural gas (LNG) to keep
canceling some U.S. cargoes in coming months. In April, buyers canceled about 20 U.S. LNG cargoes that
were due to be shipped in June.
    Looking ahead, U.S. gas futures for the balance of 2020 and calendar 2021 were
trading higher than the front-month on expectations demand will jump once governments loosen coronavirus
travel and work restrictions.
    The U.S. Energy Information Administration (EIA) projected gas production will fall to an annual
average of 89.8 billion cubic feet per day (bcfd) in 2020 and 84.9 bcfd in 2021 from a record 92.2 bcfd
in 2019 due to the reduction in drilling.
    Data provider Refinitiv said average gas output in the U.S. Lower 48 states has fallen to 90.3 bcfd
so far in May, down from an eight-month low of 92.9 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 81.7 bcfd in 2020 and 79.2 bcfd in 2021 from a record 85.0 bcfd in 2019.
    With the weather expected to turn milder, Refinitiv projected demand in the Lower 48 states,
including exports, would fall from an average of 85.7 bcfd this week to 79.2 bcfd next week. That is
lower than Refinitiv's demand forecasts on Monday of 86.4 bcfd this week and 81.6 bcfd next week.
    Even though the coronavirus is reducing global gas use, the EIA still expects U.S. exports to hit
record highs in 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 have averaged 7.2 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 8        May 1         May 8      average    
                                         (Actual)       (Actual)                  May 8     
 U.S. natgas storage (bcf):                +102           +109         +100        +85      
                                                                                            
                                                                                            
 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                              47             53           75          63           60
 U.S. GFS CDDs                             101            103           78          82           78
 U.S. GFS TDDs                             148            156          153         145          138
                                                                                            
 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              90.2           90.1         89.4        89.0         77.0
 U.S. Imports from Canada                  5.9            5.9          6.1         7.6          7.8
 U.S. LNG Imports                          0.0            0.0          0.0         0.0          0.1
 Total U.S. Supply                         96.1           96.0         95.5        96.6         84.9
 
 U.S. Demand (bcfd)
 U.S. Exports to Canada                    2.5            2.1          2.1         2.6          1.9
 U.S. Exports to Mexico                    4.5            4.7          4.6         4.6          3.9
 U.S. LNG Exports                          7.3            6.8          6.8         5.8          2.0
 U.S. Commercial                           6.6            8.0          5.2         6.4          5.5
 U.S. Residential                          7.9            10.4         5.3         7.5          6.1
 U.S. Power Plant                          25.8           24.7         27.5        25.8         25.3
 U.S. Industrial                           22.1           22.6         21.6        22.0         20.6
 U.S. Plant Fuel                           4.5            4.5          4.4         4.5          4.5
 U.S. Pipe Distribution                    1.8            1.9          1.7         1.9          1.9
 U.S. Vehicle Fuel                         0.1            0.1          0.1         0.1          0.1
 Total U.S. Consumption                    68.9           72.2         65.8        68.2         64.0
 Total U.S. Demand                         83.2           85.7         79.2        81.2         71.8
                                                                                            
                                                                                            
 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)                                         
 Hub                                   Current Day     Prior Day                            
 Henry Hub NG-W-HH-SNL                   1.70           1.74                              
 Transco Z6 New York NG-CG-NY-SNL        1.47           1.42                              
 PG&E Citygate NG-CG-PGE-SNL             2.61           2.60                              
 Dominion South NG-PCN-APP-SNL           1.39           1.32                              
 Chicago Citygate NG-CG-CH-SNL           1.74           1.66                              
 Algonquin Citygate NG-CG-BS-SNL         1.56           1.45                              
 SoCal Citygate NG-SCL-CGT-SNL           1.98           1.88                              
 Waha Hub NG-WAH-WTX-SNL                 1.48           1.54                              
                                                                                            
 SNL U.S. Power Next-Day Prices ($ per megawatt-hour)                                       
 Hub                                   Current Day     Prior Day                            
 New England EL-PK-NPMS-SNL             15.50          17.50                              
 PJM West EL-PK-PJMW-SNL                20.00          19.50                              
 Ercot North EL-PK-ERTN-SNL             19.00          17.75                              
 Mid C EL-PK-MIDC-SNL                   12.08          16.00                              
 Palo Verde EL-PK-PLVD-SNL               2.75          17.50                              
 SP-15 EL-PK-SP15-SNL                   14.00          15.35                              
 
 (Reporting by Scott DiSavino; Editing by David Gregorio and Marguerita Choy)
  
 
 
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