Sept 9 (Reuters) - U.S. natural gas futures fell about 5% on Monday on expectations a hurricane forecast to hit Louisiana later this week could cut demand by curtailing gas flows to Gulf Coast liquefied natural gas (LNG) export plants and causing homes and businesses to lose power.

Oil and gas producers have started evacuating staff and curbing drilling along the Gulf Coast to prepare for Tropical Storm Francine as it churned across the Gulf of Mexico.

The U.S. National Hurricane Center projected Francine will strengthen into a hurricane on Tuesday before hitting the Louisiana coast on Wednesday. Louisiana is home to three of the nation's seven big LNG export plants.

Because over 75% of U.S. gas production comes from big inland shale basins like Appalachia in Pennsylvania, West Virginia and Ohio and the Permian in West Texas and eastern New Mexico, analysts said hurricanes were more likely to reduce gas prices by cutting demand through power outages and knocking LNG export plants out of service.

That is different from 20 years ago when 20% of the nation's gas came from the federal offshore Gulf of Mexico. Back then, Gulf Coast hurricanes usually caused gas prices to spike higher, but now that offshore region produces only about 2% of the country's gas.

Front-month gas futures for October delivery on the New York Mercantile Exchange fell 10.5 cents, or 4.6%, to settle at $2.170 per million British thermal units (mmBtu). On Friday, the contract closed at its highest level since July 12 for a second day in a row.

The price drop came despite a forecast for more demand next week than previously expected and higher LNG feedgas so far this month.

Also weighing on gas prices for much of this year has been the tremendous oversupply of gas left in storage after a mild winter.

There was still about 10% more gas in storage than normal for this time of year even though injections have been smaller than usual in 16 of the last 17 weeks.

Analysts said those small weekly builds happened mostly because several producers cut output this year after spot prices at the U.S. Henry Hub benchmark fell to a 25-year low in the spring and have remained relatively low since.

SUPPLY AND DEMAND

Financial firm LSEG said gas output in the Lower 48 U.S. states slid to an average of 102.4 billion cubic feet per day (bcfd) so far in September, down from 103.2 bcfd in August.

Meteorologists forecast weather across the U.S. would remain mostly near normal through Sept. 12 before turning warmer than usual from Sept. 13-24. Energy traders, however, noted that warm weather in mid-September would only average around 75 degrees Fahrenheit (23.9 degrees Celsius), compared with a daily average of 79 F in mid-August.

LSEG forecast average gas demand in the Lower 48, including exports, will rise from 100.7 bcfd this week to 101.2 bcfd next week. The forecast for next week was higher than LSEG's outlook on Friday.

Gas flows to the seven big U.S. LNG export plants rose to an average of 13.4 bcfd so far in September, up from 12.9 bcfd in August. That compares with a monthly record high of 14.7 bcfd in December 2023.

On a daily basis, LNG feedgas hit a three-month high of 13.6 bcfd on Sunday.

Looking ahead, Berkshire Hathaway Energy's 0.8-bcfd Cove Point LNG export plant in Maryland will likely be shut for about three weeks of routine annual maintenance around Sept. 20, according to the plant's history and notices to customers.

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https://www.reuters.com/business/energy/us-natgas-prices-fall-5-hurricane-threatens-lng-power-demand-2024-09-09/