US Natural Gas Hits 7-Month Low, Set for Ninth Weekly Loss

(Reuters) — U.S. natural gas futures dropped 7% on Friday to a seven-month low after falling for nine weeks in a row in a move that could help cut U.S. consumer heating costs this winter.

Prices have been falling for weeks due to forecasts for mild weather, record output and low liquefied natural gas (LNG) exports that have allowed utilities to inject more gas into storage than usual ahead of winter. Gas prices have plunged about 59% during the past nine weeks.

"Gas production has been strong and the ongoing shutdown of the Freeport LNG plant has allowed for a big comeback in storage. It was not too long ago that some folks were worried about whether we would have enough gas in storage for this winter," said Phil Flynn, an analyst at Price Futures Group.

Freeport LNG in Texas shut for unplanned work after an explosion on June 8.

Front-month gas futures <NGc1> fell 39.9 cents, or 7.4%, to settle at $4.959 per million British thermal units (MMBtu), their lowest close since March 21.

That also put the front-month down for a sixth day in a row for the first time since February 2021 and kept it in technically oversold territory, with a relative strength index (RSI) below 30 for a fifth consecutive day for the first time since June 2022.

For the week, the contract dropped about 23%, its biggest weekly decline since falling 24% in December 2021.

Despite weeks of losses, U.S. gas futures were still up about 33% so far this year as soaring global gas prices feed demand for U.S. exports due to supply disruptions and sanctions linked to Russia's Feb. 24 invasion of Ukraine.

The drop in gas prices should help reduce U.S. costs this winter for the 60 million homes that use gas for heat. Lower gas costs should also help reduce costs for the 54 million homes that use electricity for heat since about 38% of the nation's power comes from burning natural gas.

The U.S. Energy Information Administration projected homes burning gas for heat would spend about 29% more this winter than last year, while homes using electric for heat would spend about 10% more. About 88% of the nation's 130 million homes use either gas or electricity for heat.

Major LNG outages include Berkshire Hathaway Energy's shutdown on Oct. 1 of its 0.8 billion-cubic-feet-per-day (Bcf/d) Cove Point LNG export plant in Maryland for about three weeks of planned maintenance, and the ongoing outage at the 2.0-Bcf/d Freeport plant. Freeport expects the facility to return to at least partial service in early to mid-November.

Flynn at Price Futures Group said gas prices could "shoot back up again" if combined with some cold weather once the LNG export plants return to service.

At least four vessels were heading to Freeport, according to Refinitiv data, including Prism Brilliance, currently located off the coast from the plant, Prism Diversity, expected to arrive Oct. 30, Prism Courage, expected to arrive Nov. 4, and Seapeak Methane, expected to arrive Nov. 22. Some traders expect Freeport will return to service in November while others believe the return could be delayed. Officials at Freeport said they remain on track to return the plant in November.

Gas was trading at $33 per MMBtu in Europe <TRNLTTFMc1> and $32 in Asia <JKMc1>.

Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 99.5 Bcf/d so far in October, up from a monthly record of 99.4 Bcf/d in September.

Refinitiv projected average U.S. gas demand, including exports, would fall from 100.1 Bcf/d this week to 94.2 Bcf/d next week with the coming of milder weather, before rising to 96.9 Bcf/d in two weeks as the weather cools. The forecast for this week and next were lower than Refinitiv's outlook on Thursday.

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