U.S. natural gas futures little changed ahead of storage report

(Reuters) - U.S. natural gas futures held steady on Wednesday as the market waited for direction from a federal report expected to show last week's storage draw was smaller than usual for this time of year as output rises to record highs.

Analysts forecast U.S. utilities pulled 22 Bft³ of gas from storage during the week ended Nov. 19, the first withdrawal of the 2021–2022 winter season. That compares with a decline of 11 Bft³ in the same week last year and a 5-yr (2016–2020) average decline of 44 Bft³.

If correct, last week's injection would cut stockpiles to 3.622 Tft³, which would be 1.6% below the 5-yr average of 3.681 Tft³ for this time of year.

On their second to last trading day as the front-month, gas futures for December delivery fell $0.02, or 0.4%, to $4.947 per MMBtu. The December contract expires on Friday, Nov. 26, the day after the U.S. Thanksgiving holiday on Thursday. The January contract, which will soon be the front-month, was down 0.7% to around $5.00 per mmBtu.

In recent months, global gas prices hit record highs as utilities around the world scrambled for LNG cargoes to replenish extremely low stockpiles in Europe and meet insatiable demand in Asia, where energy shortfalls have caused power blackouts in China.

Following those global gas prices, U.S. futures jumped to a 12-yr high in early October, but have since pulled back because the U.S. has plenty of gas in storage and ample production for the winter.

Overseas prices continue to trade about six times higher than U.S. futures. Analysts have said European inventories were about 17% below normal for this time of year, compared with just 2% below normal in the U.S. Data provider Refinitiv said output in the U.S. Lower 48 states averaged 96.2 Bft³d so far in November, up from 94.1 Bft³d in October and a monthly record of 95.4 Bft³d in November 2019.

Refinitiv projected average U.S. gas demand, including exports, would rise from 111.4 Bft³d this week to 112.9 Bft³d next week as the weather turns seasonally colder and homes and businesses crank up their heaters. Those forecasts were a little higher than Refinitiv's forecast on Tuesday.

The amount of gas flowing to U.S. LNG export plants has averaged 11.2 Bft³d so far in November, up from 10.5 Bft³d in October as the sixth train at Cheniere Energy Inc's Sabine Pass plant in Louisiana started producing LNG. That compares with a monthly record of 11.5 Bft³d in April.

With gas prices around $30/MMBtu in Europe and $36/MMBtu in Asia, compared with about $5/MMBtu in the U.S., traders said buyers around the world will keep purchasing all the LNG the U.S. can produce.

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