Sept 10 (Reuters) - U.S. natural gas futures climbed about 3% on Tuesday as oil and gas producers cut output ahead of a hurricane expected to hit Louisiana on Wednesday.

The U.S. National Hurricane Center projected Tropical Storm 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 operating LNG export plants.

Front-month gas futures for October delivery on the New York Mercantile Exchange rose 6.2 cents, or 2.9%, to settle at $2.232 per million British thermal units (mmBtu).

Prices rose even though Francine is expected to cut demand by curtailing gas flows to Gulf Coast liquefied natural gas (LNG) export plants and cause homes and businesses to lose power.

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 about 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.

In the spot market, pipeline constraints caused next-day gas prices at the Waha hub in the Permian Shale in West Texas to fall to an all-time low and average in negative territory for a record 34th time this year.

Waha prices first averaged below zero in 2019. It happened 17 times in 2019, six times in 2020 and once in 2023.

SUPPLY AND DEMAND

Financial firm LSEG said gas output in the Lower 48 U.S. states has slid to an average of 102.2 billion cubic feet per day so far in September, down from 103.2 bcfd in August.

On a daily basis, output was on track to drop by 2.9 bcfd to a preliminary 16-week low of 99.9 bcfd on Tuesday.

Analysts said some of that output declined probably because some energy firms shut production ahead of Francine. They also noted, however, that preliminary data is often revised later in the day.

Meteorologists forecast weather across the U.S. would remain mostly near normal through Sept. 12 before turning warmer than usual from Sept. 13-25. Analysts however noted that warmer-than-normal weather in mid-September would still be pretty mild, keeping demand for heating and cooling low.

LSEG forecast average gas demand in the Lower 48, including exports, will rise from 99.4 bcfd this week to 100.4 bcfd next week. Those forecasts were lower than LSEG's outlook on Monday.

Gas flows to the seven big U.S. LNG export plants have risen to an average of 13.3 bcfd so far in September, from 12.9 bcfd in August. That compares with a monthly record high of 14.7 bcfd in December 2023.

On a daily basis, total LNG feedgas was on track to decline to a one-week low of 12.4 bcfd on Tuesday after the amount of gas flowing to the 2.0-bcfd Cameron LNG export plant in Louisiana fell from 2.2 bcfd on Monday to 1.3 bcfd on Tuesday, LSEG data showed.

The NHC forecast Francine would hit the Louisiana coast near Cameron as a hurricane on Wednesday.

LNG plants pull in more gas than they can turn into LNG because they use some of that gas to fuel equipment.

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https://www.reuters.com/business/energy/us-natgas-prices-climb-3-producers-cut-output-ahead-storm-francine-2024-09-10/