US natgas prices rise 2% on lower output, LNG flows outlook

By Scott DiSavino

NEW YORK, Oct 2 (Reuters) - US natural gas futures rose about 2% on Friday to a one-week high, on a recent decline in output and an expected rise in flows to liquefied natural gas export plants when Cove Point in Maryland exits a maintenance outage.

Front-month gas futures for November delivery on the New York Mercantile Exchange rose 6.8 cents, or 2.3%, to settle at $3.035 per million British thermal units (mmBtu), their highest close since September 25.

For the week, the contract was down about 5% after gaining roughly 10% last week.

Looking ahead, futures for calendar 2027 dropped to an average of $3.21 per mmBtu, their lowest price since February 2022, while the 12-month futures strip fell to $3.06, its lowest since November 2024.

In another sign the market is not too worried about gas supplies this winter, the premium of futures for March over April 2027 fell to a record low of around 9 cents per mmBtu.

March is the last month of the winter season, when demand is high and utilities pull gas from storage to heat homes and businesses. Analysts say March should never trade below April, the first month of the summer season, when demand is low and energy firms produce enough gas to inject fuel into storage for the next winter.

The industry calls the March-April spread the "widow-maker" because rapid price moves resulting from changing weather forecasts have forced some speculators out of business. Notably, the Amaranth hedge fund lost more than $6 billion in 2006.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the US Lower 48 states slid to 112.2 billion cubic feet per day (bcfd) so far in October, down from record highs of 113.3 in both August and September.

Record output and mild spring weather have allowed energy firms to keep the amount of gas in inventory above the five-year (2021-2025) average since March, reaching a high of 7.7% above normal in April.

A hot summer, however, forced energy firms to pull lots of gas out of storage to fuel the power plants needed to keep air conditioners humming, cutting the inventory surplus. About 40% of US power generation comes from gas-fired plants.

With the weather still warmer than normal this week, the amount of gas in storage likely slid to 1.8% above normal during the week ended October 2, down from 2.4% above normal in the previous week, according to analyst estimates ahead of next Thursday's weekly federal inventory report. EIA/GAS NGAS/POLL

Looking forward, meteorologists predicted weather across the country would remain mostly near normal through October 17, which should keep both heating and cooling demand low.

But with the weather turning seasonally cooler, LSEG said average gas demand in the Lower 48 states, including exports, will rise from 102.3 bcfd this week to 104.5 bcfd over the next two weeks. The forecasts for this week and next were lower than LSEG's outlook on Thursday.

Average gas flows to the nine large US LNG export plants fell to 17.0 bcfd so far in October, down from 17.9 bcfd in September and the monthly record high of 18.8 bcfd in April.

Analysts did not expect US energy firm Berkshire Hathaway Energy's 0.8-bcfd Cove Point LNG export plant in Maryland to return to service for another week, but noted some pipeline work around the plant could end this weekend.

Cove Point shut around September 19 for a few weeks of annual maintenance.