U.S. natural gas futures held near a three-week low on Friday as bearish mild weather forecasts and ample amounts of gas in storage offset a bullish decline in output and near-record amounts of flows to liquefied natural gas export plants.

Front-month gas futures for November delivery on the New York Mercantile Exchange rose 0.3 cents, or 0.1%, to $2.941 per million British thermal units (mmBtu) at 8:48 a.m. EDT (1248 GMT). On Thursday, the contract closed at its lowest level since September 26 for a third day in a row.

That dragged the front-month down about 5% so far this week after it fell about 7% last week.

Looking forward, the market is showing signs that traders are not worried about having enough gas supplies in storage for the winter. The premium of futures for March over April 2026 (NGH26-J26) was on track to fall to a record low of around 7 cents per mmBtu.

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, including the Amaranth hedge fund, which lost more than $6 billion in 2006.

Traders use the March-April and October-November (NGV26-X26) spreads to bet on winter weather forecasts and supply and demand. March is the last month of the winter-heating season when utilities pull gas out of storage, and October is the last month of the summer cooling season when utilities inject gas into storage.

In the tropics, the U.S. National Hurricane Center projected a tropical wave in the central Atlantic Ocean had a 30% chance of strengthening into a tropical cyclone as it moves into the Caribbean Sea over the next week. The system is not expected to reach the U.S. mainland during that time.

SUPPLY AND DEMAND

LSEG said average gas output in the Lower 48 states fell to 106.6 billion cubic feet per day so far in October, down from 107.4 bcfd in September and a record monthly high of 108.0 bcfd in August.

Record output earlier this year allowed energy companies to inject more gas into storage than usual. There is currently about 4% more gas in storage than normal for this time of year.

Meteorologists forecast the weather will remain mostly warmer than normal through November 1.

That late-season warmth should reduce gas demand by cutting the amount of fuel used to heat homes and businesses by more than it boosts the amount of fuel that power generators burn to keep air conditioners humming. About 40% of the power produced in the U.S. comes from burning gas.

LSEG projected average gas demand in the Lower 48 states, including exports, would rise from 100.1 bcfd this week to 100.6 bcfd next week and 103.0 bcfd in two weeks. The forecast for next week was lower than LSEG’s outlook on Thursday.

The average amount of gas flowing to the eight big U.S. LNG export plants rose to 16.4 bcfd so far in October, up from 15.7 bcfd in September and a monthly record high of 16.0 bcfd in April.
Source: Reuters