April 28, 2020 / 2:34 PM / a month ago

U.S. natgas futures rise on slowing output as drillers shut wells

    April 28 (Reuters) - U.S. natural gas futures rose on Tuesday with a continued slowdown in output as
drillers shut oil wells in shale basins due to the collapse in crude prices. Those oil wells also produce
a lot of gas.
    Traders noted gas prices rose despite long-term forecasts that government lockdowns to stop the
coronavirus spread would reduce domestic demand for gas and cut U.S. liquefied natural gas (LNG) and
pipeline exports.
    On its last day as the front-month, gas futures for May delivery on the New York Mercantile
Exchange rose 3.6 cents, or 2.0%, to $1.855 per million British thermal units (mmBtu) at 10:00 a.m. EDT
(1400 GMT).
    The June contract, which will soon be the front-month, was up about 7 cents to $1.98 per mmBtu.
    Looking ahead, gas futures for the balance of 2020 and calendar 2021 were trading
even higher than the front-month on expectations demand will jump as the economy snaps back once
governments loosen travel and work restrictions.
    U.S. crude, meanwhile, remained on track to drop for a fourth week in a row, falling about 60%
during that time.
    The U.S. Energy Information Administration (EIA) projected gas production will fall to an annual
average of 91.7 billion cubic feet per day (bcfd) in 2020 and 87.5 bcfd in 2021 from a record 92.2 bcfd
in 2019 as drillers shut wells and cut spending on new drilling. That would be the first annual
production decline since 2016 and the first time output fell for two consecutive years since 2005.

    Data provider Refinitiv said gas output in the U.S. Lower 48 states averaged just 92.7 bcfd so far in
April, down from an all-time monthly high of 95.3 bcfd in November.
    EIA projected coronavirus lockdowns will cut U.S. gas use - not including exports - to an average of
83.8 bcfd in 2020 and 81.2 bcfd in 2021 from a record 85.0 bcfd in 2019. That would be the first annual
decline in consumption since 2017 and the first time demand falls for two consecutive years since 2006.

    With milder, spring-like weather coming, Refinitiv projected demand in the Lower 48 states, including
exports, would slide from an average of 86.7 bcfd this week to 85.1 bcfd next week.
    Even though the coronavirus is cutting gas use around the world, EIA still expects U.S. exports to
hit fresh record highs in coming years as more LNG export plants and pipelines enter service. The agency,
however, has said the pace of that growth will slow from what it had projected before the pandemic.
    Refinitiv said U.S. pipeline exports averaged just 2.4 bcfd to Canada and 4.6 to Mexico so far in
April, down from an all-time monthly high of 3.5 bcfd to Canada in December and 5.8 bcfd to Mexico in
October.
    U.S. LNG exports averaged only 8.3 bcfd so far in April, according to Refinitiv, down from an
all-time monthly high of 8.8 bcfd in February.
              
                                       Week ended      Week ended    Year ago    Five-year   
                                           April       April 17      April 24     average    
                                       24(Forecast)     (Actual)                 April 24    
 U.S. natgas storage (bcf):                +53            +43          +114         +74      
                                                                                             
                                                                                             
 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                             110             96          110          97            96
 U.S. GFS CDDs                              59             55           55          57            51
 U.S. GFS TDDs                             169            151          165          154          147
                                                                                             
 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              92.6           91.8         92.1        89.6          77.2
 U.S. Imports from Canada                  5.9            6.1          6.6          7.7          8.1
 U.S. LNG Imports                          0.0            0.0          0.0          0.0          0.1
 Total U.S. Supply                         98.5           97.9         98.8        97.3          85.4
 
 U.S. Demand (bcfd)
 U.S. Exports to Canada                    2.4            2.7          2.6          2.5          2.3
 U.S. Exports to Mexico                    4.6            4.6          4.7          4.6          3.7
 U.S. LNG Exports                          8.1            7.5          8.0          5.2          1.8
 U.S. Commercial                           9.1            7.4          6.9          7.2          8.2
 U.S. Residential                          12.5           9.2          8.4          9.1          11.3
 U.S. Power Plant                          27.0           26.6         26.0        26.8          21.5
 U.S. Industrial                           22.7           22.1         22.0        22.2          23.0
 U.S. Plant Fuel                           4.6            4.5          4.6          4.5          4.6
 U.S. Pipe Distribution                    2.1            1.9          1.9          1.9          2.2
 U.S. Vehicle Fuel                         0.1            0.1          0.1          0.1          0.1
 Total U.S. Consumption                    78.0           71.9         69.9        71.8          70.9
 Total U.S. Demand                         93.1           86.7         85.1        84.1          78.7
                                                                                             
                                                                                             
 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)                                          
 Hub                                   Current Day     Prior Day                             
 Henry Hub NG-W-HH-SNL                   1.68           1.81                               
 Transco Z6 New York NG-CG-NY-SNL        1.55           1.65                               
 PG&E Citygate NG-CG-PGE-SNL             2.34           2.39                               
 Dominion South NG-PCN-APP-SNL           1.48           1.58                               
 Chicago Citygate NG-CG-CH-SNL           1.72           1.75                               
 Algonquin Citygate NG-CG-BS-SNL         1.78           1.80                               
 SoCal Citygate NG-SCL-CGT-SNL           1.75           1.52                               
 Waha Hub NG-WAH-WTX-SNL                 1.20           0.75                               
                                                                                             
 SNL U.S. Power Next-Day Prices ($ per megawatt-hour)                                        
 Hub                                   Current Day     Prior Day                             
 New England EL-PK-NPMS-SNL             18.75          21.50                               
 PJM West EL-PK-PJMW-SNL                18.75          20.75                               
 Ercot North EL-PK-ERTN-SNL             29.25          23.25                               
 Mid C EL-PK-MIDC-SNL                   16.86          12.17                               
 Palo Verde EL-PK-PLVD-SNL              28.50          25.81                               
 SP-15 EL-PK-SP15-SNL                   23.75          22.75                               
 
 (Reporting by Scott DiSavino; Editing by Sandra Maler)
  
 
 
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