May 5, 2020 / 4:52 PM / a month ago

U.S. natgas futures soar to fresh 15-week high on slowing output

    May 5 (Reuters) - U.S. natural gas futures jumped on Tuesday to a fresh 15-week high on more signs
output is slowing as drillers shut oil wells in shale basins due to the 60% collapse in crude prices
since the start of the year, and despite forecasts for demand and exports to decline due to
coronavirus-related lockdowns.
    Those oil wells also produce a lot of gas.
    Front-month gas futures for June delivery on the New York Mercantile Exchange were up 16
cents, or 8.0%, to $2.153 per million British thermal units at 12:34 p.m. EDT (1634 GMT), putting the
contract on track for its highest close since Jan. 15.
    Looking ahead, 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 travel and
work restrictions.
    The premium of March over April NGH21-J21, a spread traders use to bet on winter weather, rose to
its highest since February 2011. The gas industry calls the March-April spread the "widow maker" because
rapid price moves resulting from changing weather forecasts have knocked some speculators betting on the
contracts out of business, including the Amaranth hedge fund in 2006.
    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 average gas output in the U.S. Lower 48 states has fallen to 89.6 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 cooler weather coming, Refinitiv projected demand in the Lower 48 states, including exports,
would rise from an average of 82.5 bcfd this week to 86.8 bcfd next week. That compares with Refinitiv's
forecasts on Monday of 84.2 bcfd this week and 88.5 bcfd next week.
    Even though the coronavirus pandemic is reducing gas use, EIA still expects U.S. exports to hit
record highs in the coming years as more liquefied natural gas (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 7.0 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                             110            113           87          81           77
 U.S. GFS CDDs                              65             66           59          67           64
 U.S. GFS TDDs                             175            179          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           89.7         90.0        88.9         77.0
 U.S. Imports from Canada                  5.9            5.9          6.5         7.7          7.8
 U.S. LNG Imports                          0.0            0.0          0.0         0.0          0.1
 Total U.S. Supply                         97.8           95.6         96.5        96.6         84.9
 
 U.S. Demand (bcfd)
 U.S. Exports to Canada                    2.8            2.7          2.7         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           25.2         24.9        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           68.3         72.0        67.7         64.0
 Total U.S. Demand                         86.4           82.5         86.8        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                   1.78           1.69                              
 Transco Z6 New York NG-CG-NY-SNL        1.68           1.28                              
 PG&E Citygate NG-CG-PGE-SNL             2.54           2.35                              
 Dominion South NG-PCN-APP-SNL           1.53           1.32                              
 Chicago Citygate NG-CG-CH-SNL           1.78           1.71                              
 Algonquin Citygate NG-CG-BS-SNL         1.63           1.31                              
 SoCal Citygate NG-SCL-CGT-SNL           1.98           1.45                              
 Waha Hub NG-WAH-WTX-SNL                                1.45                              
                                                                                            
 SNL U.S. Power Next-Day Prices ($ per megawatt-hour)                                       
 Hub                                   Current Day     Prior Day                            
 New England EL-PK-NPMS-SNL             16.75          17.75                              
 PJM West EL-PK-PJMW-SNL                21.25          19.75                              
 Ercot North EL-PK-ERTN-SNL             19.25          68.89                              
 Mid C EL-PK-MIDC-SNL                   15.92          11.95                              
 Palo Verde EL-PK-PLVD-SNL              20.25          21.25                              
 SP-15 EL-PK-SP15-SNL                   21.50          17.75                              
 
 (Reporting by Scott DiSavino
Editing by Paul Simao)
  
 
 
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below