U.S. natgas prices fall 5% on big storage build, low feedgas to Freeport LNG

(Reuters) - U.S. natural gas futures dropped about 5% on a bigger-than-expected storage build and forecasts for lower demand over the next two weeks than previously expected due to a drop in feedgas to the Freeport LNG export plant in Texas.

The U.S. Energy Information Administration (EIA) said utilities added 24 billion cubic feet (bcf) of gas into storage during the week ended April 5.

That was much more than the 8-bcf increase analysts forecast in a Reuters poll and compares with an addition of 11 bcf in the same week last year and a five-year (2019-2023) average rise of 24 bcf for this time of year. [EIA/GAS][NGAS/POLL]

Last week's increase boosted gas stockpiles to about 38% above normal levels for this time of year.

Front-month gas futures <NGc1> for May delivery on the New York Mercantile Exchange fell 8.7 cents, or 4.6%, to $1.798 per million British thermal units (mmBtu) at 10:49 a.m. EDT (1449 GMT).

On Wednesday, the contract closed at its highest price since March 6 for a second day in a row.

In the spot market, next-day gas prices at the Waha hub <NG-WAH-WTX-SNL> in the Permian Basin in West Texas fell from negative $1.50 on April 9 to negative $2.10 per mmBtu on April 10, their lowest since April 2020 for a third day in a row, according to data from SNL Energy on the LSEG terminal.

In Canada, meanwhile, spot gas prices at the AECO hub <NG-ASH-ALB-SNL> in Alberta fell to $1.01 per mmBtu, their lowest level since October 2022 for a third day in a row.

SUPPLY AND DEMAND

Financial firm LSEG said gas output in the Lower 48 U.S. states fell to an average of 98.9 billion cubic feet per day (bcfd) so far in April, down from 100.8 bcfd in March. That compares with a monthly record of 105.6 bcfd in December 2023.

On a daily basis, output was on track to drop by 3.3 bcfd over the past five days to a preliminary 12-week low of 96.7 bcfd on Thursday. Energy traders have said preliminary data is often revised higher later in the day.

With warmer weather coming, LSEG forecast gas demand in the Lower 48, including exports, would fall from 100.6 bcfd this week to 96.0 bcfd next week. Those forecasts were lower than LSEG's outlook on Wednesday.

Gas flows to the seven big U.S. liquefied natural gas (LNG) export plants slid to an average of 12.6 bcfd so far in April, down from 13.1 bcfd in March. That compares with a monthly record of 14.7 bcfd in December.

On a daily basis, LNG feedgas was on track to fall to a one-week low of 12.4 bcfd as the amount of gas flowing to Freeport drops to 0.2 bcfd on Thursday from 0.7 bcfd on Wednesday and an average of 0.8 bcfd over the prior seven days.

Before Freeport said on April 10 that it experienced a trip of Train 3, analysts and traders thought at least one and maybe two trains at the plant were on track to exit an inspection and repair outage sooner than previously expected.

Freeport said in late March it expects Trains 1 and 2 to remain shut until May for inspections and repairs, while Train 3 was operating. Each Freeport train can turn about 0.7 bcfd of gas into LNG.

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