U.S. natural gas futures held near a one-week low on Oct. 8 as lower output and higher demand forecasts offset expectations Hurricane Milton could cause millions of homes and businesses to lose power in Florida later this week.

Those power outages will reduce the amount of gas generators need to burn - possibly for days.

The U.S. National Hurricane Center projected Milton will slam into the west coast of Florida as a major storm on the night of Oct 9 before sweeping across the central part of the state on Oct. 10.

Those likely Florida power outages will add to the roughly 200,000 homes and businesses still without electric service in the Carolinas and Georgia since Hurricane Helene moved inland after slamming into Florida on Sept. 26.

Front-month gas futures for November delivery on the New York Mercantile Exchange fell 0.9 cents, or 0.3%, to $2.737/MMBtu at 8:08 a.m. EDT (1208 GMT), putting the contract on track for its lowest close since Sept. 26 for a third day in a row.

One factor that supported prices in recent weeks—the front-month has gained about 41% over the past six weeks—was a drop in the amount of fuel utilities have injected into storage for the 2024 to 2025 winter heating season.

Storage builds in July, August and September were at record lows, according to federal energy data going back to 1997.

That is because many producers reduced their drilling activities so far this year after average spot monthly prices at the U.S. Henry Hub benchmark in Louisiana fell to a 32-year low in March. Prices have remained relatively low since then.

Even though storage injections have been lower than usual in 20 weeks of the past 21 weeks, the amount of gas in inventory was still about 5% above normal levels for this time of year due to low heating demand during the mild winter of 2023 to 2024. 

Supply and demand

Financial company LSEG said average gas output in the Lower 48 U.S. states fell to 100.9 Bcf/d so far in October, down from 101.8 Bcf/d in September. That compares with a record 105.5 Bcf/d in December 2023.

On a daily basis, output was on track to fall about 1.5 Bcf/d over the past three days to a preliminary four-month low of 99.8 Bcf/d on Oct. 8. Analysts, however, have noted that preliminary data is often revised later in the day.

LSEG forecast average gas demand in the Lower 48, including exports, will rise from 97.1 Bcf/d this week to 99.0 bcfd next week. Those forecasts were higher than LSEG's outlook on Oct. 7.

Gas flows to the seven big U.S. LNG export plants fell to an average of 12.3 Bcf/d so far in October, down from 12.7 Bcf/d in September. That compares with a monthly record high of 14.7 Bcf/d in December 2023.

That reduction was due mostly to the planned Sept. 20 shutdown of Berkshire Hathaway Energy's 0.8-Bcf/d Cove Point LNG export plant in Maryland for around three weeks of annual maintenance, which will likely end around Oct. 10.

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