March 13, 2020 / 7:05 PM / a month ago

UPDATE 1-U.S. natgas futures edge up with oil on expectations output will decline

 (Adds prices)
    March 13 (Reuters) - U.S. natural gas futures edged up on
Friday on expectations the plunge in oil prices earlier in the
week would cause oil and its associated gas production to drop,
allowing demand to absorb much of the gas oversupply that has
built up in recent years.
    U.S. energy firms responded quickly to falling oil prices,
which lost a third of their value this week, by announcing plans
to slash spending on new drilling that were even bigger than
what they had already said they would cut.
    U.S. financial services firm Cowen & Co said the independent
exploration and production firms it tracks have released plans
to cut spending on new drilling by 17% in 2020. That is up from
planned spending cuts of 11% before the oil price drop and
compares with cuts of 11% in 2019 from 2018's levels.

    Analysts said a drop in U.S. crude output would cut the
amount of gas produced in association with oil drilling in shale
basins like the Permian in West Texas. Much of the growth in gas
output over the past several years has come from associated gas.

    Front-month gas futures for April delivery on the New
York Mercantile Exchange rose 2.8 cents, or 1.5%, to settle at
$1.869 per million British thermal units (mmBtu).
    For the week, the front-month was on track to rise over 10%,
its biggest weekly increase since November.
    Looking ahead, futures for calendar 2021
 were on track to rise over calendar 2022
 for the first time since January.
    Despite this week's gains, gas prices were still down about
36% since hitting an eight-month high of $2.905 per mmBtu in
early November because near-record production and mild winter
weather enabled utilities to leave more gas in storage, making
fuel shortages and price spikes unlikely.
    With all the price swings this week, implied volatility
 for gas futures soared 65% to its highest since late
February.
    Oil prices, meanwhile, were on track for
their worst week since the 2008 global financial crisis after
the coronavirus outbreak rocked the world economy while top
exporter Saudi Arabia and its allies stepped up plans to flood
the market with record levels of supply.
    Data provider Refinitiv projected gas demand in the U.S.
Lower 48 states, including exports, would rise from an average
of 101.5 billion cubic feet per day (bcfd) this week to 104.3
bcfd next week before sliding to 103.8 bcfd in two weeks. That
is similar to Refinitiv's forecasts on Thursday.
    The amount of gas flowing to U.S. LNG export plants was on
track to rise to 8.8 bcfd on Friday from 8.2 bcfd on Thursday,
according to preliminary data from Refinitiv. 
             
                                        Week ended     Week ended    Year ago    Five-year   
                                         March 13       March 6      March 13     average    
                                        (Forecast)      (Actual)                 March 13    
 U.S. natgas storage (bcf):                -12            -48          -91          -63      
                                                                                             
                                                                                             
 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                             252            234          293          280          274
 U.S. GFS CDDs                              26             28           10          14            11
 U.S. GFS TDDs                             278            262          370          294          285
                                                                                             
 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              93.9           93.7         93.7        88.5          76.9
 U.S. Imports from Canada                  7.1            6.6          7.2          8.6          8.5
 U.S. LNG Imports                          0.1            0.1          0.0          0.1          0.2
 Total U.S. Supply                        101.2          100.5        100.9        97.2          85.6
 
 U.S. Demand (bcfd)
 U.S. Exports to Canada                    2.8            3.0          3.1          3.1          2.6
 U.S. Exports to Mexico                    5.6            5.6          5.6          4.8          3.8
 U.S. LNG Exports                          8.1            8.0          8.9          5.1          1.8
 U.S. Commercial                           13.2           10.9         11.3        13.4          12.3
 U.S. Residential                          20.5           16.1         17.2        21.7          19.4
 U.S. Power Plant                          28.7           27.8         27.8        25.1          23.7
 U.S. Industrial                           23.8           23.1         23.2        23.4          22.6
 U.S. Plant Fuel                           4.6            4.6          4.6          4.6          4.7
 U.S. Pipe Distribution                    2.5            2.3          2.3          2.3          2.5
 U.S. Vehicle Fuel                         0.1            0.1          0.1          0.1          0.1
 Total U.S. Consumption                    93.4           85.0         86.6        90.6          85.3
 Total U.S. Demand                        109.9          101.5        104.3        103.6         93.5
                                                                                             
                                                                                             
 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)                                          
 Hub                                   Current Day     Prior Day                             
 Henry Hub NG-W-HH-SNL                   1.82           1.96                               
 Transco Z6 New York NG-CG-NY-SNL        1.50           1.70                               
 PG&E Citygate NG-CG-PGE-SNL             2.75           2.84                               
 Dominion South NG-PCN-APP-SNL           1.45           1.52                               
 Chicago Citygate NG-CG-CH-SNL           1.66           1.77                               
 Algonquin Citygate NG-CG-BS-SNL         1.67           1.74                               
 SoCal Citygate NG-SCL-CGT-SNL           2.35           2.40                               
 Waha Hub NG-WAH-WTX-SNL                 0.82           1.15                               
                                                                                             
 SNL U.S. Power Next-Day Prices ($ per megawatt-hour)                                        
 Hub                                   Current Day     Prior Day                             
 New England EL-PK-NPMS-SNL             20.25          21.25                               
 PJM West EL-PK-PJMW-SNL                22.25          23.00                               
 Ercot North EL-PK-ERTN-SNL             20.75          29.50                               
 Mid C EL-PK-MIDC-SNL                   23.50          23.75                               
 Palo Verde EL-PK-PLVD-SNL              29.50          27.75                               
 SP-15 EL-PK-SP15-SNL                   30.50          30.75                               
 
 (Reporting by Scott DiSavino; editing by Jonathan Oatis and Tom
Brown)
  
 
 
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