U.S. natgas edges up with big drop in rig count, forecasts for less output
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U.S. natural gas futures edged up on
Monday on expectations production will decline in coming weeks
and months after the rig count dropped last week.
The small increase came despite a near 9% drop in oil prices
and forecasts for milder weather and lower heating demand over
the next two weeks than earlier expected.
On its first day as the front-month, gas futures for May
delivery on the New York Mercantile Exchange rose 1.9
cents, or 1.1%, to settle at $1.690 per million British thermal
units. That is still less than a dime over its $1.602 close on
March 23, which was its lowest settle since September 1995.
Global oil benchmark Brent crude plunged to its cheapest in
almost 18 years on Monday, while U.S. crude briefly tumbled
below $20 per barrel, on growing fears the global coronavirus
shutdown could last months and demand for fuel will decline
further.
Looking ahead, gas prices in late 2020 and 2021
rose even more than the front-month on expectations
demand will rise later in 2020 with the return of economic
growth after governments loosen travel restrictions once the
coronavirus spread slows.
The premium of futures for November over October
, which traders use to bet on demand next winter,
rose to its highest since August 2010 for a second day in a row.
Even before the coronavirus started to cut global economic
growth and demand for energy, gas was already trading near its
lowest in years as record production and months of mild winter
weather enabled utilities to leave more gas in storage, making
fuel shortages and price spikes unlikely.
Analysts project gas stockpiles will hit an all-time high in
2020 as drillers keep producing record amounts of fuel even
though demand is expected to slump.
U.S. gas production is expected to decline through the rest
of 2020, however, as energy firms cut rigs. Last week, drillers
cut oil rigs by the most in a week since April 2015 due to the
coronavirus-related slump in economic activity. A lot of gas
comes out of oil rigs in shale basins.
With the coming of spring-like weather, data provider
Refinitiv projected gas demand in the U.S. Lower 48 states,
including exports, would slide from an average of 97.9 billion
cubic feet per day (bcfd) this week to 94.9 bcfd next week. That
is much lower than Refinitiv’s forecast on Friday of 98.2 bcfd
this week and 101.9 bcfd next week.
Week ended Week ended Year ago Five-year
March 27 March 20 March 27 average
(Forecast) (Actual) March 27
U.S. natgas storage (bcf): -22 -29 +6 -19
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 183 217 185 194 204
U.S. GFS CDDs 33 24 26 26 20
U.S. GFS TDDs 216 241 211 220 224
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 93.6 93.7 93.7 90.2 76.9
U.S. Imports from Canada 6.9 6.5 7.0 8.1 8.5
U.S. LNG Imports 0.0 0.0 0.0 0.0 0.2
Total U.S. Supply 100.5 100.3 100.7 98.3 85.6
U.S. Demand (bcfd)
U.S. Exports to Canada 2.5 2.9 2.8 2.7 2.6
U.S. Exports to Mexico 5.6 5.6 5.6 4.8 3.8
U.S. LNG Exports 9.2 9.2 9.4 4.0 1.8
U.S. Commercial 11.2 9.7 8.5 10.5 12.3
U.S. Residential 16.9 14.1 11.9 15.5 19.4
U.S. Power Plant 29.4 26.9 27.6 25.3 23.7
U.S. Industrial 23.2 22.7 22.2 23.1 22.6
U.S. Plant Fuel 4.6 4.6 4.6 4.6 4.7
U.S. Pipe Distribution 2.3 2.1 2.0 2.1 2.5
U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1
Total U.S. Consumption 87.8 80.2 77.0 81.2 85.3
Total U.S. Demand 105.1 97.9 94.9 92.7 93.5
SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)
Hub Current Day Prior Day
Henry Hub 1.70 1.73
Transco Z6 New York 1.13 1.28
PG&E Citygate 2.13 2.25
Dominion South 1.07 1.25
Chicago Citygate 1.33 1.48
Algonquin Citygate 1.20 1.38
SoCal Citygate 1.58 1.80
Waha Hub 0.28 0.21
SNL U.S. Power Next-Day Prices ($ per megawatt-hour)
Hub Current Day Prior Day
New England 16.50 15.50
PJM West 17.50 19.75
Ercot North 20.00 27.50
Mid C 15.00 16.50
Palo Verde 15.50 13.50
SP-15 18.50 12.50
(Reporting by Scott DiSavino; Editing by Tom Brown)
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