US natgas prices slide 2% to 3-1/2-year low on mild weather forecasts

By Scott DiSavino Feb 20 (Reuters) - U.S. natural gas futures slid about 2% to a 3-1/2-year low on Tuesday on milder forecasts for weather and heating demand through early March, near record output and a drop in global gas prices to the lowest in months. Traders also noted U.S. gas inventories remained much higher than normal for this time of year and the amount of gas flowing to liquefied natural gas (LNG) export plants remained low due to ongoing work at Freeport LNG's plant in Texas. Analysts forecast gas stockpiles were currently around 22% above-normal levels for this time of year. Gas prices were down about 37% so far this year, prompting some producers to plan to reduce drilling in 2024. Still, analysts said gas output could still increase because oil prices are high enough to encourage producers to drill in shale basins like the Permian in Texas and New Mexico and the Bakken in North Dakota, areas where oil wells produce a lot of associated gas. Front-month gas futures for March delivery on the New York Mercantile Exchange fell 3.1 cents, or 1.9%, to $1.578 per million British thermal units (mmBtu) at 11:51 a.m. EST (1651 GMT), putting the contract on track for its lowest close since June 2020, during the height of COVID-19 demand destruction. With the front-month down 41% over the past three weeks, speculators boosted their net short futures and options positions on the New York Mercantile and Intercontinental Exchanges to the most since March 2020. SUPPLY AND DEMAND Financial company LSEG said gas output in the U.S. Lower 48 states rose to an average of 105.6 billion cubic feet per day (bcfd) so far in February from 102.1 bcfd in January, still shy of the monthly record of 106.3 bcfd in December. Meteorologists projected weather across the Lower 48 states would remain mostly warmer than normal through March 6, except for a couple of colder than normal days over the weekend of March 2-3. With milder weather coming, LSEG forecast U.S. gas demand in the Lower 48, including exports, would fall from 130.3 bcfd this week to 117.5 bcfd next week. The forecast for this week was higher than LSEG's outlook on the Friday before the long U.S. Presidents Day weekend, while its forecast for next week was lower. Gas flows to the seven big U.S. liquefied natural gas (LNG) export plants slid to an average of 13.6 bcfd so far in February, down from 13.9 bcfd in January and a monthly record of 14.7 bcfd in December. Analysts do not expect U.S. LNG feedgas to return to record levels until Freeport LNG is back at full power, which could occur in late February. The U.S. became the world's biggest LNG supplier in 2023, ahead of recent leaders Australia and Qatar, as much higher global prices fed demand for more exports due in part to supply disruptions and sanctions linked to Russia's war in Ukraine. Gas was trading at an eight-month low of around $7 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe and a 33-month low of around $9 at the Japan Korea Marker (JKM) benchmark in Asia. Week ended Week ended Year ago Five-year Feb 16 Feb 9 Feb 16 average Forecast Actual Feb 16 U.S. weekly natgas storage change (bcf): -82 -49 -75 -168 U.S. total natgas in storage (bcf): 2,453 2,535 2,205 2,019 U.S. total storage versus 5-year average 21.5% 15.9% Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five Year Last Year Average Average 2023 (2018-2022) Henry Hub 1.59 1.61 2.44 2.66 3.60 Title Transfer Facility (TTF) 7.55 7.45 16.52 13.04 14.39 Japan Korea Marker (JKM) 8.57 9.35 16.87 14.39 14.31 LSEG 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 289 322 315 364 358 U.S. GFS CDDs 4 4 21 9 7 U.S. GFS TDDs 293 326 336 373 365 LSEG U.S. Weekly GFS Supply and Demand Forecasts Prior Week Current Next Week This Week Five-Year Week Last Year (2019-2023) Average For Month U.S. Supply (bcfd) U.S. Lower 48 Dry Production 105.9 105.1 105.3 101.3 92.4 U.S. Imports from Canada 8.8 8.9 8.8 8.7 9.1 U.S. LNG Imports 0.0 0.0 0.0 0.0 0.2 Total U.S. Supply 114.7 114.1 114.1 110.0 101.7 U.S. Demand (bcfd) U.S. Exports to Canada 3.5 3.5 3.5 2.6 2.7 U.S. Exports to Mexico 6.5 6.4 6.4 5.8 5.2 U.S. LNG Exports 13.9 13.5 13.4 12.8 8.4 U.S. Commercial 13.7 14.8 12.1 14.1 16.3 U.S. Residential 22.1 24.0 18.6 22.6 27.6 U.S. Power Plant 32.3 35.0 31.9 30.3 29.3 U.S. Industrial 24.5 25.0 23.8 24.1 25.4 U.S. Plant Fuel 5.2 5.2 5.2 5.2 5.3 U.S. Pipe Distribution 2.7 2.8 2.5 2.7 2.7 U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1 Total U.S. Consumption 100.7 107.0 94.2 99.1 106.7 Total U.S. Demand 124.6 130.3 117.5 120.3 123.0 U.S. Northwest River Forecast Center (NWRFC) at The Dalles Dam Current Day Prior Day 2023 2022 2021 % of Normal % of Normal % of Normal % of Normal % of Normal Forecast Forecast Actual Actual Actual Apr-Sep 79 77 83 107 81 Jan-Jul 81 79 77 102 79 Oct-Sep 81 80 76 103 81 U.S. weekly power generation percent by fuel - EIA Week ended Week ended Week ended Week ended Week ended Feb 23 Feb 16 Feb 9 Feb 2 Jan 26 Wind 13 11 14 9 7 Solar 3 4 3 3 2 Hydro 6 7 7 7 6 Other 1 1 1 2 2 Petroleum 0 0 0 0 0 Natural Gas 41 41 38 40 43 Coal 15 16 16 18 22 Nuclear 20 21 21 20 19 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu) Hub Current Day Prior Day Henry Hub 1.55 1.53 Transco Z6 New York 1.59 1.33 PG&E Citygate 2.83 2.89 Eastern Gas (old Dominion South) 1.41 1.44 Chicago Citygate 1.48 1.55 Algonquin Citygate 2.99 2.50 SoCal Citygate 1.92 2.45 Waha Hub 0.73 0.95 AECO 1.20 1.25 SNL U.S. Power Next-Day Prices ($ per megawatt-hour) Hub Current Day Prior Day New England 33.00 33.00 PJM West 23.50 26.75 Ercot North 20.75 11.50 Mid C 65.00 64.00 Palo Verde 20.25 24.50 SP-15 19.50 21.75 (Reporting by Scott DiSavino; Editing by David Gregorio)