U.S. natgas edges up on lower output, higher heating demand

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U.S. natural gas futures edged up on Wednesday with a decline in output over the past

couple of days, forecasts for higher heating use during the next two weeks and a near 8% increase in gas

prices in Europe.

Demand for U.S. liquefied natural gas (LNG) exports will remain strong so long as gas prices in Europe and

Asia stay much higher than in the United States. Prices in Europe and Asia were about six times higher than in

the United States due to extremely low gas stockpiles in Europe and insatiable demand for the fuel in Asia.

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While utilities in Europe scramble to fill gas inventories before the winter heating season and

governments seek ways to control soaring prices, the situation in the United States is much calmer. Yes,

energy prices are near multi-year highs and gas stockpiles are about 5% below normal, but there is a growing

belief in the market that the United States will have more than enough fuel for the winter.

Analysts expect U.S. gas inventories will top 3.5 trillion cubic feet (tcf) by the start of the winter

heating season in November, which they said would be a comfortable level even though it falls short of the 3.7

tcf five-year average. In Europe, analysts say stockpiles are about 15% below normal for this time of year.

Front-month gas futures rose 8.5 cents, or 1.5%, to settle at $5.590 per million British thermal

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units (mmBtu), their highest close since Oct. 7.

Data provider Refinitiv said gas output in the U.S. lower 48 states rose to an average of 92.1 billion

cubic feet per day (bcfd) so far in October from 91.1 bcfd in September. That compares with a monthly record

of 95.4 bcfd in November 2019.

Over the past couple of days, however, Refinitiv said daily output fell to a near four-week low of 90.3

bcfd on lower production in the Haynesville and Permian shale basins.

Refinitiv projected average U.S. gas demand, including exports, would rise from 84.8 bcfd this week to

85.6 bcfd next week as the weather turns seasonally cooler and more homes and businesses turn on their

heaters. Those forecasts were higher than Refinitiv expected on Tuesday.

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With gas prices near $31 per mmBtu in Europe and $33 in Asia, versus just over $5 in

the United States, traders said buyers around the world will keep purchasing all the LNG the United States

could produce.

Refinitiv said the amount of gas flowing to U.S. LNG export plants slipped from an average of 10.4 bcfd in

September to 10.2 bcfd so far in October due to short-term work at some Gulf Coast plants and earlier

maintenance at Berkshire Hathaway Energy’s Cove Point LNG export plant in Maryland.

With the return of Cove Point on Tuesday, LNG feedgas, however, rose to a one-month high of 11.1 bcfd on

Wednesday.

No matter how high global prices rise, the United States only has capacity to turn about 10.5 bcfd of gas

into LNG. Global markets will have to wait until later this year to get more from the United States when the

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sixth liquefaction train at Cheniere Energy Inc’s Sabine Pass and Venture Global Log’s Calcasieu Pass

in Louisiana are expected to start producing LNG in test mode.

The amount of gas the export plants pull in from pipelines can exceed the amount of gas they can turn into

LNG because the facilities use some of the gas to fuel their operations.

Week ended Week ended Year ago Five-year

Oct 8 Oct 1 Oct 8 average

(Forecast) (Actual) Oct 8

U.S. weekly natgas storage change (bcf): 94 118 50 79

U.S. total natgas in storage (bcf): 3,382 3,288 3,870 3,543

U.S. total storage versus 5-year average -4.5% -5.1%

Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five Year

Last Year Average Average

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2020 (2016-2020)

Henry Hub 5.42 5.51 2.84 2.13 2.66

Title Transfer Facility (TTF) 30.66 29.61 4.89 3.24 5.19

Japan Korea Marker (JKM) 32.90 33.08 5.97 4.22 6.49

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 106 94 115 128 145

U.S. GFS CDDs 35 43 60 44 38

U.S. GFS TDDs 141 137 175 172 183

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 92.0 92.3 92.7 87.0 83.1

U.S. Imports from Canada 7.4 7.2 7.4 6.6 7.5

U.S. LNG Imports 0.0 0.0 0.0 0.0 0.1

Total U.S. Supply 99.4 99.6 100.1 93.6 90.7

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U.S. Demand (bcfd)

U.S. Exports to Canada 2.1 2.5 2.4 2.2 2.0

U.S. Exports to Mexico 5.6 5.7 5.7 6.2 5.0

U.S. LNG Exports 9.9 10.7 11.0 7.2 3.7

U.S. Commercial 5.0 5.3 6.3 6.1 6.8

U.S. Residential 4.3 5.0 6.8 6.3 7.2

U.S. Power Plant 32.0 28.5 25.5 30.6 27.7

U.S. Industrial 20.6 20.7 21.3 22.2 21.6

U.S. Plant Fuel 4.5 4.6 4.6 4.6 4.5

U.S. Pipe Distribution 1.8 1.8 1.8 1.8 1.7

U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1

Total U.S. Consumption 68.4 66.0 66.4 71.7 69.6

Total U.S. Demand 86.1 84.8 85.6 87.3 80.3

SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)

Hub Current Day Prior Day

Henry Hub 5.34 5.46

Transco Z6 New York 4.75 4.64

PG&E Citygate 6.90 6.91

Dominion South 4.56 4.45

Chicago Citygate 5.09 5.07

Algonquin Citygate 4.99 5.18

SoCal Citygate 6.23 6.39

Waha Hub 5.08 5.10

SNL U.S. Power Next-Day Prices ($ per megawatt-hour)

Hub Current Day Prior Day

New England 61.75 67.50

PJM West 43.25 51.25

Ercot North 66.75 51.50

Mid C 68.13 87.75

Palo Verde 48.50 35.50

SP-15 50.25 45.00

(Reporting by Scott DiSavino

Editing by Nick Zieminski and Philippa Fletcher)

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