April 27, 2020 / 7:41 PM / a month ago

UPDATE 1-U.S. natgas futures rise as oil price slump triggers output worries

 (Recasts, adds comments, updates with settlement prices)
    April 27 (Reuters) - U.S. natural gas futures settled higher on Monday, after sliding as much as 8.8%
earlier, on expectations associated gas production will decline as drillers shut oil wells in shale
basins in response to turmoil in the crude market.
    One day ahead of the expiry date, front-month gas futures for May delivery on the New York
Mercantile Exchange rose 7.3 cents, or 4.2%, to settle at $1.819 per million British thermal units
(mmbtu).
    "The upward price movement reflects market's concern about possible tightening of gas supply in the
future. All stems from the recent historical oil market developments and the implication on associated
gas production," said Zhen Zhu, economist at Oklahoma City-based C.H. Guernsey.
    Brent crude fell below $20 a barrel and U.S. crude plunged 27% on Monday, driven lower by skittish
investors fleeing the U.S. benchmark due to lack of available storage resulting from the
coronavirus-induced collapse in demand.
    Natural gas prices had earlier dropped to their lowest since April 16 at $1.593 mmbtu on demand
concerns, but later reversed course on expectations production will decline as drillers shut oil wells in
shale basins due to the collapse of U.S. crude prices. Analysts note that what is bad for oil is good for
gas because those oil wells also produce a lot of gas.
    The total number of oil and gas rigs active in the United States was down 64 to 465 last week,
closing in on the all-time low of 404 rigs during the week ended May 20, 2016, according to Baker Hughes
data going back to 1940.    
    "On one side, the COVID-19 certainly has reduced gas demand even though the specific amount of impact
is unknown. On the other side, summer weather will be a key factor determining the demand ... Given these
fundamental factors, I think the market may have reached a point where it lacks strength to go north
further," Zhu said.
    Gas output in the Lower 48 states fell to a 11-week low of 91.7 bcfd on Thursday, and stood at 92.0
bcfd on Sunday, according to data provider Refinitiv.
    Demand in the Lower 48 states, including exports, is expected to decline as the weather turns milder,
falling from 87 bcfd this week to 84.8 bcfd next, according to Refinitiv.
    Looking ahead, gas futures for the balance of 2020 and calendar 2021 were trading
higher than the front-month on expectations demand will jump as the economy snaps back once governments
loosen travel and work restrictions.

          
                                       Week ended      Week ended    Year ago    Five-year   
                                           April       April 17      April 24     average    
                                       24(Forecast)     (Actual)                 April 24    
 U.S. natgas storage (bcf):                +53            +43          +114         +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                              96            117          110          97            99
 U.S. GFS CDDs                              55             61           55          57            49
 U.S. GFS TDDs                             151            178          165          154          148
                                                                                             
 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              92.6           91.9         92.1        89.8          77.2
 U.S. Imports from Canada                  5.9            6.1          6.4          7.8          8.1
 U.S. LNG Imports                          0.0            0.0          0.0          0.0          0.1
 Total U.S. Supply                         98.5           98.0         98.5        97.6          85.4
 
 U.S. Demand (bcfd)
 U.S. Exports to Canada                    2.4            2.7          2.5          2.7          2.3
 U.S. Exports to Mexico                    4.6            4.7          4.7          4.0          3.7
 U.S. LNG Exports                          8.1            7.6          8.1          5.1          1.8
 U.S. Commercial                           9.1            7.3          6.7          6.5          8.2
 U.S. Residential                          12.5           9.2          8.0          7.7          11.3
 U.S. Power Plant                          27.0           26.9         26.3        25.7          21.5
 U.S. Industrial                           22.7           22.1         21.9        21.8          23.0
 U.S. Plant Fuel                           4.6            4.5          4.5          4.6          4.6
 U.S. Pipe Distribution                    2.1            1.9          1.8          2.1          2.2
 U.S. Vehicle Fuel                         0.1            0.1          0.1          0.1          0.1
 Total U.S. Consumption                    78.0           72.1         69.5        68.5          70.9
 Total U.S. Demand                         93.1           87.0         84.8        80.3          78.7
                                                                                             
                                                                                             
 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)                                          
 Hub                                   Current Day     Prior Day                             
 Henry Hub NG-W-HH-SNL                   1.81           1.86                               
 Transco Z6 New York NG-CG-NY-SNL        1.65           1.79                               
 PG&E Citygate NG-CG-PGE-SNL             2.39           2.34                               
 Dominion South NG-PCN-APP-SNL           1.58           1.67                               
 Chicago Citygate NG-CG-CH-SNL           1.75           1.83                               
 Algonquin Citygate NG-CG-BS-SNL         1.80           1.97                               
 SoCal Citygate NG-SCL-CGT-SNL           1.52           1.80                               
 Waha Hub NG-WAH-WTX-SNL                 0.75           1.22                               
                                                                                             
 SNL U.S. Power Next-Day Prices ($ per megawatt-hour)                                        
 Hub                                   Current Day     Prior Day                             
 New England EL-PK-NPMS-SNL             21.50          22.50                               
 PJM West EL-PK-PJMW-SNL                20.75          21.25                               
 Ercot North EL-PK-ERTN-SNL             23.25          23.00                               
 Mid C EL-PK-MIDC-SNL                   12.17          17.48                               
 Palo Verde EL-PK-PLVD-SNL              25.81          21.00                               
 SP-15 EL-PK-SP15-SNL                   22.75          21.75                               
 

 (Reporting by Sumita Layek in Bengaluru; Editing by Steve Orlofsky and Dan Grebler)
  
 
 
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