U.S. natgas prices fall 5% on lower LNG feedgas, weekend storm

(Reuters) - U.S. natural gas futures fell about 5% to a one-week low on Thursday due to forecasts for milder weather than previously expected, a potential demand destroying storm on the East Coast this weekend and a decline in the amount of gas flowing to liquefied natural gas (LNG) export plants.

That price drop came despite a federal report showing a storage build that was close to analysts estimates.

The U.S. Energy Information Administration (EIA) said utilities added 64 billion cubic feet (bcf) of gas into storage during the week ended Sept. 15.

That was near the 67-bcf build analysts forecast in a Reuters poll and compares with an increase of 99 bcf in the same week last year and a five-year (2018-2022) average increase of 84 bcf.

Analysts said that build was smaller-than-usual because warmer-than-normal weather last week prompted power generators to burn more of the fuel to keep air conditioners humming.

Front-month gas futures for October delivery on the New York Mercantile Exchange fell 12.3 cents, or 4.5%, to settle at $2.610 per million British thermal units (mmBtu), their lowest close since Sept. 11.

On the U.S. East Coast, the National Hurricane Center projected Tropical Cyclone 16 would strengthen into a tropical storm later Thursday before slamming into coastal North Carolina, Virginia and Maryland over the weekend.

Analysts noted that tropical storms on the East Coast generally reduce gas demand by knocking out power to homes and businesses.

In other news, U.S. energy firm Chevron said it would accept the terms of a deal brokered by Australia's industrial arbitrator to resolve a dispute with unions over pay and conditions at two LNG export plants in the country.

Over the past several weeks, gas prices in Europe and Asia have climbed on worries the Chevron strikes could lead to a drop in global gas supplies.

Supply and demand

Financial firm LSEG said average gas output in the lower 48 U.S. states eased to 102.1 billion cubic feet per day (bcfd) so far in September, down from a record 102.3 bcfd in August.

But on a daily basis, output over the past four days was on track to drop by around 2.1 bcfd to a preliminary 10-week low of 100.6 bcfd on Thursday. Analysts have noted that preliminary data is often revised later in the day.

Meteorologists forecast the weather in the lower 48 states would remain near normal until around Sept. 30 before turning mostly warmer than usual from Oct. 1-6. Traders, however, noted that above normal temperatures in late September were still mild, with averages expected to be around 71 degrees Fahrenheit (21.7 Celsius) versus a normal of 70 F for that time of year.

With seasonally cooler coming, LSEG forecast U.S. gas demand, including exports, will ease from 95.3 bcfd this week to 93.7 bcfd next week. Those forecasts were lower than LSEG's outlook on Wednesday.

Gas flows to the seven big U.S. LNG export plants averaged 12.8 bcfd so far in September, up from 12.3 bcfd in August. That compares with a monthly record of 14.0 bcfd in April.

On a daily basis, however, feedgas was on track to fall to a three-week low of 11.6 bcfd on Thursday due to the shutdown of Berkshire Hathaway Energy's 0.8-bcfd Cove Point in Maryland for annual maintenance and a reduction at Cheniere Energy's 4.5-bcfd Sabine Pass in Louisiana.

Gas flows to Sabine were on track to drop to a one-month low of 3.6 bcfd on Thursday from an average of 4.5 bcfd over the past several weeks.

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