May 11, 2020 / 2:01 PM / 22 days ago

U.S. natgas futures rise as output falls despite forecasts for lower demand

    May 11 (Reuters) - U.S. natural gas futures on Monday rose over 3% on slower output as energy firms
slash spending on new drilling and shut oil wells after crude price collapsed due to demand destruction
from the novel coronavirus. Those oil wells also produce a lot of gas.
    That price increase came despite forecasts for lower demand over the next two weeks as the weather
turns milder and businesses remain closed due to government lockdowns to stop the coronavirus spread.
    Front-month gas futures for June delivery on the New York Mercantile Exchange (NYMEX) rose
6.1 cents, or 3.4%, to $1.884 per million British thermal units at 9:39 a.m. EDT (1339 GMT).
    That kept front-month at the Henry Hub benchmark in Louisiana higher than the Title Transfer
Facility (TTF) in the Netherlands. Henry Hub futures were also was trading
higher than TTF in July and August.
    Analysts said those high U.S. prices and low prices elsewhere should prompt buyers of liquefied
natural gas (LNG) to keep canceling some U.S. cargoes in coming months. In April, buyers canceled about
20 U.S. LNG cargoes that were due to be shipped in June.
    Looking ahead, U.S. 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 coronavirus
travel and work restrictions.
    Those higher prices prompted speculators to boost their net long positions on the NYMEX and
Intercontinental Exchange last week to the highest since April 2019 for a fourth week in a row.

    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 due to the reduction in drilling.
    Data provider Refinitiv said average gas output in the U.S. Lower 48 states has fallen to 90.3 bcfd
so far in May, down from an eight-month low of 92.9 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 the weather expected to turn milder, Refinitiv projected demand in the Lower 48 states,
including exports, would fall from an average of 86.4 bcfd this week to 81.6 bcfd next week. That is
lower than Refinitiv's demand forecasts on Friday of 87.4 bcfd this week and 82.7 bcfd next week.
    Even though the coronavirus is reducing global gas use, the EIA still expects U.S. exports to hit
record highs in coming years as more 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 7.3 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 8        May 1         May 8      average    
                                         (Actual)       (Actual)                  May 8     
 U.S. natgas storage (bcf):                +102           +109         +100        +85      
                                                                                            
                                                                                            
 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                              53             97           75          63           62
 U.S. GFS CDDs                             103             70           78          82           76
 U.S. GFS TDDs                             156            167          153         145          138
                                                                                            
 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              90.2           90.6         90.6        89.0         77.0
 U.S. Imports from Canada                  5.9            5.8          6.0         7.6          7.8
 U.S. LNG Imports                          0.0            0.0          0.0         0.0          0.1
 Total U.S. Supply                         96.1           96.4         96.6        96.6         84.9
 
 U.S. Demand (bcfd)
 U.S. Exports to Canada                    2.5            2.1          2.1         2.6          1.9
 U.S. Exports to Mexico                    4.5            4.7          4.6         4.6          3.9
 U.S. LNG Exports                          7.3            7.3          7.7         5.8          2.0
 U.S. Commercial                           6.6            8.0          5.1         6.4          5.5
 U.S. Residential                          7.9            10.4         5.2         7.5          6.1
 U.S. Power Plant                          25.8           24.8         28.9        25.8         25.3
 U.S. Industrial                           22.1           22.6         21.6        22.0         20.6
 U.S. Plant Fuel                           4.5            4.5          4.5         4.5          4.5
 U.S. Pipe Distribution                    1.8            1.9          1.8         1.9          1.9
 U.S. Vehicle Fuel                         0.1            0.1          0.1         0.1          0.1
 Total U.S. Consumption                    68.9           72.3         67.1        68.2         64.0
 Total U.S. Demand                         83.2           86.4         81.6        81.2         71.8
                                                                                            
                                                                                            
 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)                                         
 Hub                                   Current Day     Prior Day                            
 Henry Hub NG-W-HH-SNL                   1.74           1.83                              
 Transco Z6 New York NG-CG-NY-SNL        1.42           1.59                              
 PG&E Citygate NG-CG-PGE-SNL             2.60           2.74                              
 Dominion South NG-PCN-APP-SNL           1.32           1.48                              
 Chicago Citygate NG-CG-CH-SNL           1.66           1.84                              
 Algonquin Citygate NG-CG-BS-SNL         1.45           1.50                              
 SoCal Citygate NG-SCL-CGT-SNL           1.88           2.20                              
 Waha Hub NG-WAH-WTX-SNL                 1.54           1.56                              
                                                                                            
 SNL U.S. Power Next-Day Prices ($ per megawatt-hour)                                       
 Hub                                   Current Day     Prior Day                            
 New England EL-PK-NPMS-SNL             17.50          16.75                              
 PJM West EL-PK-PJMW-SNL                19.50          20.33                              
 Ercot North EL-PK-ERTN-SNL             17.75          17.00                              
 Mid C EL-PK-MIDC-SNL                   16.00          16.25                              
 Palo Verde EL-PK-PLVD-SNL              17.50          23.25                              
 SP-15 EL-PK-SP15-SNL                   15.35          24.75                              
 
 (Reporting by Scott DiSavino)
  
 
 
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