News wire – U.S. natural gas futures edged up on Friday on forecasts for warmer weather, more air-conditioning demand in late May and a continued slowdown in output.
Front-month gas futures for June delivery on the New York Mercantile Exchange rose 0.9 cents or 0.5%, to $1.690 per million British thermal units at 9:58 a.m. EDT (1358 GMT).
For the week, the contract was down about 7% after falling about 4% in the prior week.
Government lockdowns to stop the spread of the novel coronavirus have cut energy use, causing fuel prices and exports to drop as businesses shut. U.S. crude futures are down about 50% this year.
U.S. producers reacted quickly to the price collapse by shutting oil wells and slashing spending on new drilling. Those oil wells also produce a lot of gas.
But now that output is dropping, prices are expected to rise in the future as governments slowly lift travel restrictions.
U.S. gas for the balance of 2020 and calendar 2021 was trading much higher than
The U.S. Energy Information Administration projected gas production will fall to an annual average of 89.8 billion cubic feet per day (bcfd) in 2020 and 84.9 bcfd in 2021 from a record 92.2 bcfd in 2019.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states has fallen to 90.1 bcfd so far in May, down from an eight-month low of 92.9 bcfd in April and an all-time monthly high of 95.4 bcfd in November.
The EIA projected U.S. gas use – not including exports – will drop to an average of 81.7 bcfd in 2020 and 79.2 bcfd in 2021 from a record 85.0 bcfd in 2019.
Refinitiv projected demand in the Lower 48 states, including exports, will fall from an average of 85.6 bcfd this week to 78.5 bcfd next week as the weather turns milder before increasing to 80.0 bcfd in two weeks as temperatures rise with the coming of summer.
Even though the coronavirus is reducing global gas use, the EIA still expects U.S. exports to hit record highs in coming years as more LNG export plants and pipelines enter service.
Still, the agency has reduced its projections on the pace of that growth due to the pandemic.
Refinitiv said U.S. LNG exports averaged 6.9 bcfd so far in May, down from a four-month low of 8.1 bcfd in April and an all-time high of 8.7 bcfd in February.
U.S. gas prices for June at the Henry Hub benchmark in Louisiana have mostly traded over the Title Transfer Facility (TTF) in the Netherlands since late April. As long as U.S. prices remain over the European benchmark – Henry Hub is also trading over TTF for July and August – analysts said LNG buyers will keep canceling U.S. cargoes.
In April, buyers canceled about 20 U.S. LNG cargoes due to be shipped in June.
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