US Natural Gas Prices Plummet Amid Record Output and Ample Storage
US natural gas futures prices declined by about 2% on Thursday to a two-week low, due to record output and ample storage levels. The front-month gas futures contract for October delivery on the New York Mercantile Exchange fell by 4.5 cents or 1.6%, to USD2.777 per million British thermal units (mmBtu). This puts the contract on track for its lowest close since August 25, for a second consecutive day.
The market is not showing significant concern about supply meeting demand next year, as futures prices for calendar 2027 fell to USD3.26 per mmBtu, their lowest level since February 2022. Despite expectations that the federal report would show energy firms added less gas to storage than usual due to hot weather and high air conditioning demand, analysts forecasted an increase of 31 billion cubic feet (bcf) during the week ended September 4.
This is lower compared to last year's increase of 69 bcf and a five-year average increase of 52 bcf for the same period. Financial firm LSEG reported that average gas output in the US Lower 48 states rose to 113.4 billion cubic feet per day (bcfd) so far in September, surpassing the monthly record high of 112.2 bcfd in August.
Record output and mild spring weather have allowed energy firms to maintain above-average storage levels since March. Meteorologists forecast that the weather will remain mostly warmer than normal through September 25, prompting power generators to continue burning more gas than usual to keep air conditioners running. About 40% of US power generation comes from gas-fired plants.