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U.S. natgas futures rose near 4% with oil on expectations output will decline

March 13 (Reuters) - U.S. natural gas futures jumped almost 4% on Friday on expectations the plunge in oil prices earlier this week would cause oil and its associated gas production to drop, allowing demand to absorb much of the gas oversupply that has built up in recent years. U.S. energy firms responded quickly to the falling oil prices, which lost a third of their value, by announcing plans to slash spending on new drilling that were even bigger than what they had already said they would cut. Analysts said a drop in U.S. crude output would cut the amount of gas produced in association with oil drilling in shale basins like the Permian in West Texas. Much of the growth in gas output over the past several years has come from associated gas. Front-month gas futures for April delivery on the New York Mercantile Exchange rose 7 cents, or 3.8%, to $1.911 per million British thermal units (mmBtu) at 9:43 a.m. EDT (1343 GMT). For the week, the front-month was on track to rise about 12%, its biggest weekly increase since November. Looking ahead, futures for calendar 2021 were on track to rise over calendar 2022 for the first time since January. Despite this week's gains, gas prices were still down about 34% since hitting an eight-month high of $2.905 per mmBtu in early November because near-record production and mild winter weather enabled utilities to leave more gas in storage, making fuel shortages and price spikes unlikely. With all the price swings this week, implied volatility for gas futures has soared 65% since late February. Oil prices, meanwhile, were set for their biggest weekly slide since the 2008 financial crisis despite a 7% bounce on Friday, as the coronavirus outbreak threatened demand and crude producers promised more supply. Data provider Refinitiv projected gas demand in the U.S. Lower 48 states, including exports, would rise from an average of 101.5 billion cubic feet per day (bcfd) this week to 104.3 bcfd next week before sliding to 103.8 bcfd in two weeks. That is similar to Refinitiv's forecasts on Thursday. The amount of gas flowing to U.S. LNG export plants was on track to rise to 8.8 bcfd on Friday from 8.2 bcfd on Thursday, according to preliminary data from Refinitiv. That compares with an average of 7.8 bcfd last week and an all-time daily high of 9.5 bcfd on Jan. 31. U.S. production, meanwhile, edged up to 94.0 bcfd on Thursday from 93.7 bcfd on Wednesday, according to Refinitiv. That compares with an average of 93.7 bcfd last week and an all-time daily high of 96.6 bcfd on Nov. 30.

Week ended Week ended Year ago Five-yearMarch 13 March 6 March 13 average(Forecast) (Actual) March 13U.S. natgas storage (bcf): -12 -48 -91

-63

Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days

Two-Week Total Forecast Current Day Prior Day Prior Year 10-Year 30-Year Norm

Norm

U.S. GFS HDDs 252 234 293 280 274U.S. GFS CDDs 26 28 10 14 11U.S. GFS TDDs 278 262 370 294 285

Refinitiv U.S. Weekly GFS Supply and Demand Forecasts

Prior Week Current Week Next Week This Week Five-YearLast Year Average For

Month U.S. Supply (bcfd)

U.S. Lower 48 Dry Production 93.9 93.7 93.7 88.5 76.9U.S. Imports from Canada 7.1 6.6 7.2 8.6 8.5U.S. LNG Imports 0.1 0.1 0.0 0.1 0.2Total U.S. Supply 101.2 100.5 100.9 97.2 85.6

U.S. Demand (bcfd)

U.S. Exports to Canada 2.8 3.0 3.1 3.1 2.6U.S. Exports to Mexico 5.6 5.6 5.6 4.8 3.8U.S. LNG Exports 8.1 8.0 8.9 5.1 1.8U.S. Commercial 13.2 10.9 11.3 13.4 12.3U.S. Residential 20.5 16.1 17.2 21.7 19.4U.S. Power Plant 28.7 27.8 27.8 25.1 23.7U.S. Industrial 23.8 23.1 23.2 23.4 22.6U.S. Plant Fuel 4.6 4.6 4.6 4.6 4.7U.S. Pipe Distribution 2.5 2.3 2.3 2.3 2.5U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1Total U.S. Consumption 93.4 85.0 86.6 90.6 85.3Total U.S. Demand 109.9 101.5 104.3 103.6 93.5

SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)

Hub Current Day Prior DayHenry Hub <NG-W-HH-SNL> 1.82 1.96Transco Z6 New York <NG-CG-NY-SNL> 1.50 1.70PG&E Citygate <NG-CG-PGE-SNL> 2.75 2.84Dominion South <NG-PCN-APP-SNL> 1.45 1.52Chicago Citygate <NG-CG-CH-SNL> 1.66 1.77Algonquin Citygate <NG-CG-BS-SNL> 1.67 1.74SoCal Citygate <NG-SCL-CGT-SNL> 2.35 2.40Waha Hub <NG-WAH-WTX-SNL> 0.82 1.15

SNL U.S. Power Next-Day Prices ($ per megawatt-hour)

Hub Current Day Prior DayNew England <EL-PK-NPMS-SNL> 20.25 21.25PJM West <EL-PK-PJMW-SNL> 22.25 23.00Ercot North <EL-PK-ERTN-SNL> 20.75 29.50Mid C <EL-PK-MIDC-SNL> 23.50 23.75Palo Verde <EL-PK-PLVD-SNL> 29.50 27.75SP-15 <EL-PK-SP15-SNL> 30.50 30.75

(Reporting by Scott DiSavinod; editing by Jonathan Oatis)

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