U.S. natural gas prices dip 2% on smaller daily output decline, ample gas in storage 

By Scott DiSavino

U.S. natural gas futures slid about 2% on Wednesday as some traders took profits after prices rose to an 11-week high amid a smaller than previously forecast drop in output and ample supplies of gas in storage.

That price decline came despite forecasts for cooler weather that should boost demand for heating over the next two weeks.

Front-month gas futures for November delivery NG1! on the New York Mercantile Exchange fell 5.1 cents, or 1.5%, to $3.447 per million British thermal units (mmBtu) at 9:09 a.m. EDT (1309 GMT). On Tuesday, the contract closed at its highest since July 18.

That price decline pushed the contract out of technically overbought territory.

In the cash market, average prices at the Waha Hub (NG-WAH-WTX-SNL) in the Permian Shale in West Texas turned positive on Tuesday for the first time in 11 days.

Analysts at Perella Weinberg Partners' TPH&Co energy business said in a note that Waha prices likely turned positive as some producers decided to shut wells and wait for pipeline maintenance to end rather than continue paying others to take their gas.

In the tropics, the U.S. National Hurricane Center projected Tropical Storm Jerry would strengthen into a hurricane on Thursday as it marches northwest toward the northern Caribbean Islands and then northeast toward Bermuda over the next week.

The NHC also projected a disorganized trough of low pressure in the Bay of Campeche in the southwestern Gulf of Mexico off Mexico's east coast had a 10% chance of strengthening into a tropical cyclone over the next seven days.

Neither tropical system was expected to hit the U.S mainland over the next week.

Even though storms can boost U.S. gas prices by cutting output along the U.S. Gulf Coast, they are more likely to reduce prices by shutting LNG export plants and knocking out power to homes and businesses. About 40% of the power generated in the U.S. comes from gas-fired plants.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 states fell to 106.4 billion cubic feet per day so far in October, down from 107.4 bcfd in September and a record monthly high of 108.0 bcfd in August.

On a daily basis, output was on track to drop to a preliminary 13-week low of 104.7 bcfd on Wednesday. Preliminary data, however, is often revised later in the day. Wednesday's projected daily output was higher than forecast on Tuesday and compares with a daily record high of 109.2 bcfd on July 28.

Record output earlier this year allowed energy companies to inject more gas into storage than usual so far this summer. There was about 5% more gas in storage than normal for this time of year.

Meteorologists forecast the weather will remain mostly near normal through October 23.

LSEG projected average gas demand in the Lower 48 states, including exports, would slide from 99.7 bcfd this week to 98.4 bcfd next week. Those forecasts were higher than LSEG's outlook on Tuesday.

The average amount of gas flowing to the eight big U.S. LNG export plants rose to 16.1 bcfd so far in October, up from 15.7 bcfd in September and a monthly record high of 16.0 bcfd in April.