US natgas prices drop 6% on volatile contract expiration, talk of Freeport LNG reduction

Reuters
28 May
UPDATE 1-US natgas prices drop 6% on volatile contract expiration, talk of Freeport LNG reduction

US LNG export feedgas hit record high in April

US gas output hit record high in April

US gas storage about 4% over five-year normal

Adds latest prices

By Scott DiSavino

May 28 (Reuters) - U.S. natural gas futures fell about 6% on Wednesday to a one-week low in volatile contract expiration trade, pressured by an expected decline in gas flows to liquefied natural gas $(LNG)$ export plants.

Traders said Freeport LNG in Texas might reduce output and they pointed to forecasts for less demand this week than previously expected.

On its last day as the front-month, gas futures NGc1 for June delivery on the New York Mercantile Exchange (NYMEX) fell 19.4 cents, or 5.7%, to settle at $3.214 per million British thermal units (mmBtu), their lowest close since May 19.

The contract's price was highly volatile, up as much as 3% and down as much as 7% during the session. Traders cited low volumes on expiration day for the June contract. The market only traded about 2,400 front-month contracts on the NYMEX, far below the year-to-date daily average of roughly 165,000.

Futures for July NGN25, which will soon be the front-month, were down about 4.6% to $3.57 per mmBtu.

Next-day prices at the U.S. Henry Hub benchmark NG-W-HH-SNL in Louisiana traded around $3.20 per mmBtu. Low next-day Henry Hub prices have kept pressure on futures in recent weeks with spot contracts trading below front-month futures every day since late April.

Analysts have said that so long as spot prices remain far enough below front-month futures NGc1 to cover margin and storage costs, traders should be able to lock in arbitrage profits by buying spot gas, storing it and selling a futures contract.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 U.S. states fell to 105.0 billion cubic feet per day so far in May, down from a monthly record of 105.8 bcfd in April.

On a daily basis, output was on track to drop to a preliminary two-month low of 103.7 bcfd on Wednesday, down from 105.4 bcfd on Tuesday. Analysts have said preliminary data is often revised later in the day.

Energy traders said output reductions this month were primarily due to normal spring maintenance on gas pipes, including U.S. energy firm Kinder Morgan's KMI.N 2.7-bcfd Permian Highway from the Permian Basin in West Texas to the Texas Gulf Coast. Kinder Morgan said it exchanged a turbine at the Big Lake compressor station from May 13-26.

Energy firms usually work on gas pipes when demand is low in the spring and autumn.

LSEG forecast average gas demand in the Lower 48, including exports, will slide from 96.1 bcfd this week to 95.7 bcfd next week. The forecast for this week was lower than LSEG's outlook on Tuesday, while its forecast for next week was higher.

The average amount of gas flowing to the eight big LNG export plants operating in the U.S. fell to 15.1 bcfd so far in May, down from a monthly record of 16.0 bcfd in April.

The LNG feedgas decline this month was mostly due to maintenance at Cameron LNG's 2.0-bcfd plant in Louisiana, Cheniere Energy's LNG.N 3.9-bcfd Corpus Christi under construction and in operation in Texas and Cheniere's 4.5-bcfd Sabine Pass in Louisiana, and a few brief unplanned reductions at Freeport LNG's 2.1-bcfd plant in Texas, including most recently on May 28.

Looking ahead, energy traders said they expect LNG feedgas to remain below April's record high in June with Cheniere planning about three weeks of maintenance on a couple of liquefaction trains at Sabine around June 2-23.

Week ended May 23 Forecast

Week ended May 16 Actual

Year ago May 23

Five-year average

May 23

U.S. weekly natgas storage change (bcf):

+99

+120

+84

+98

U.S. total natgas in storage (bcf):

2,474

2,375

2,792

2,382

U.S. total storage versus 5-year average

+3.9%

+3.9%

Global Gas Benchmark Futures ($ per mmBtu)

Current Day

Prior Day

This Month Last Year

Prior Year Average 2024

Five-Year Average (2019-2023)

Henry Hub NGc1

3.42

3.39

2.42

2.41

3.52

Title Transfer Facility (TTF) TRNLTTFMc1

12.23

12.20

10.12

10.95

15.47

Japan Korea Marker (JKM) JKMc1

12.40

12.49

11.10

11.89

15.23

LSEG Heating $(HDD.UK)$, Cooling $(CDD.AU)$ and Total (TDD) Degree Days

Two-Week Total Forecast

Current Day

Prior Day

Prior Year

10-Year Norm

30-Year Norm

U.S. GFS HDDs

19

21

27

39

31

U.S. GFS CDDs

146

133

136

125

117

U.S. GFS TDDs

165

154

163

164

148

LSEG U.S. Weekly GFS Supply and Demand Forecasts

Prior Week

Current Week

Next Week

This Week Last Year

Five-Year (2020-2024)Average For Month

U.S. Supply (bcfd)

U.S. Lower 48 Dry Production

105.5

105.2

105.2

101.7

96.3

U.S. Imports from Canada

7.6

7.8

6.9

N/A

7.0

U.S. LNG Imports

0.0

0.0

0.0

0.0

0.0

Total U.S. Supply

113.1

113.0

112.1

N/A

103.3

U.S. Demand (bcfd)

U.S. Exports to Canada

2.2

1.6

1.6

N/A

2.4

U.S. Exports to Mexico

8.0

7.7

7.5

N/A

6.1

U.S. LNG Exports

15.1

16.2

15.5

13.2

10.4

U.S. Commercial

5.6

5.0

4.6

4.7

5.7

U.S. Residential

5.8

4.9

4.1

4.2

6.6

U.S. Power Plant

33.1

31.1

32.8

34.9

29.7

U.S. Industrial

22.6

22.4

22.2

21.6

21.5

U.S. Plant Fuel

5.2

5.2

5.2

5.2

5.1

U.S. Pipe Distribution

2.0

1.9

1.9

2.0

2.6

U.S. Vehicle Fuel

0.1

0.1

0.1

0.1

0.2

Total U.S. Consumption

74.4

70.6

71.0

72.7

71.4

Total U.S. Demand

99.7

96.1

95.7

N/A

90.3

N/A is Not Available

U.S. Northwest River Forecast Center (NWRFC) at The Dalles Dam (Fiscal year ending Sep 30)

2025 Current Day

% of Normal Forecast

2025

Prior Day % of Normal Forecast

2024

% of Normal Actual

2023

% of Normal Actual

2022

% of Normal Actual

Apr-Sep

82

82

74

83

107

Jan-Jul

82

82

76

77

102

Oct-Sep

83

83

77

76

103

U.S. weekly power generation percent by fuel - EIA

Week ended May 30

Week ended May 23

2024

2023

2022

Wind

9

13

11

10

11

Solar

6

7

5

4

3

Hydro

7

7

6

6

6

Other

1

1

1

2

2

Petroleum

0

0

0

0

0

Natural Gas

31

33

42

41

38

Coal

13

13

16

17

21

Nuclear

19

18

19

19

19

SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)

Hub

Current Day

Prior Day

Henry Hub NG-W-HH-SNL

3.20

2.93

Transco Z6 New York NG-CG-NY-SNL

1.87

1.61

PG&E Citygate NG-CG-PGE-SNL

3.08

2.41

Eastern Gas (old Dominion South) NG-PCN-APP-SNL

1.75

1.55

Chicago Citygate NG-CG-CH-SNL

2.88

2.74

Algonquin Citygate NG-CG-BS-SNL

2.90

2.12

SoCal Citygate NG-SCL-CGT-SNL

2.55

2.46

Waha Hub NG-WAH-WTX-SNL

1.52

-0.03

AECO NG-ASH-ALB-SNL

1.44

1.31

ICE U.S. Power Next-Day Prices ($ per megawatt-hour)

Hub

Current Day

Prior Day

New England E-NEPLMHP-IDX

38.25

30.00

PJM West E-PJWHDAP-IDX

39.19

32.50

Mid C W-MIDCP-IDX

50.29

41.73

Palo Verde W-PVP-IDX

37.82

25.64

SP-15 W-SP15-IDX

19.35

12.91

(Reporting by Scott DiSavino, Editing by Franklin Paul and David Gregorio)

((scott.disavino@thomsonreuters.com; +1 332 219 1922; Reuters Messaging: scott.disavino.thomsonreuters.com@reuters.net))

For gas data on the LSEG terminal type ENERGY in the search bar and then go to the GAS drop down and the NORTH AMERICA drop down.

For Interactive Map, type 'Interactive Map' in the box at upper left of the LSEG terminal

For graphics on Baker Hughes rig counts, see: http://graphics.thomsonreuters.com/15/rigcount/index.html

For next-day SNL U.S. gas prices, see: 0#SNL-NG

For next-day SNL U.S. power prices, see: 0#SNL-PWR

For U.S. natgas price and storage polls, see: NGAS/POLL

For U.S. nuclear power outages, see: NUKE/

For U.S. Northwest hydro power report, see: NWRFC

For U.S./Canada natural gas rig count vs Henry Hub futures price, see: http://tmsnrt.rs/2eT9k44

For the U.S. natural gas speed guide, see: USGAS

For the U.S. power speed guide, see: USPOWER

To determine CFTC managed money net position add (NYMEX Henry Hub options and futures combined 3023651MNET) plus (ICE Henry Hub options and futures combined 3023391MNET divided by four) plus (NYMEX Henry Hub swaps options and futures combined 303565BMNET divided by four) plus (NYMEX Henry Hub penultimate gas swaps 303565CMNET divided by four)

NYMEX Henry Hub options and futures combined 0#3CFTC023651

NYMEX Henry Hub futures only 0#1CFTC023651

ICE Henry Hub options and futures combined 0#3CFTC023391

NYMEX Henry Hub swaps options and futures combined 0#3CFTC03565B

NYMEX Henry Hub Penultimate gas swaps 0#3CFTC03565C

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