U.S. natgas drops on lower feedgas to Freeport LNG, storage surplus

(Reuters) - U.S. natural gas futures slipped ahead of the expiration of the May contract, weighed down by a drop in feedgas to Freeport LNG's Texas export terminal and a huge surplus of gas in storage.

On its last day as the front-month, gas futures <NGc1> for May delivery on the New York Mercantile Exchange traded 1.5 cents lower, or 0.9%, to $1.62 per million British thermal units (mmBtu) at 10:53 a.m. EDT, after drooping to its lowest since March 26 earlier in the session. Prices are down over 7% for the week.

On a daily basis, LNG feedgas was at 12.1 bcfd as the amount of gas flowing to Freeport LNG fell to 0.1 bcfd from 0.5 bcfd on Monday. Freeport LNG has suffered a series of outages this year, pressuring U.S. natural gas prices and adding to prices in Europe.

The issues with Freeport and weather conditions are pushing the market downward today, said Gary Cunningham, director of market research at Tradition Energy. However, the first tanker set sail from Freeport LNG's Texas export terminal on Tuesday, raising hopes of a resumption of gas processing after an outage earlier this month.

The U.S. Energy Information Administration (EIA) on Thursday said utilities injected 92 billion cubic feet (bcf) of gas into storage during the week ending April 19, beating the expectations of traders surveyed by Reuters ahead of the report, who expected weekly natural gas stocks would be up 82 bcf.

"We continue to see a very supply-heavy supply demand balance, which is why prices will remain depressed," Cunningham added.

Financial company LSEG forecasts gas demand in the Lower 48 states, including exports, to fall to 91.7 bcfd next week, from 92.2 bcfd this week.

"The expansion in the expiring May-June gas spread is offering additional evidence of an oversupplied market in which few users, such as utilities, see little need to stand for delivery with supplies more than ample to meet needs of a warmer than normal summer," energy advisory Ritterbusch and Associates said in a note.

LSEG said gas output in the Lower 48 U.S. states had fallen to an average of 96.9 billion cubic feet per day (bcfd) in April from 100.8 bcfd in March. That compares with a monthly record of 105.6 bcfd in December 2023.

Meanwhile, in Europe gas prices were slightly lower as forecasts for milder weather outweighed the impact of Norwegian outages and concerns over liquefied natural gas (LNG) supply. [NG/EU]

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