Key Highlights

● Natural gas fell 2.70% to $2.95 per mmBtu in Thursday's session.

● EIA storage rose 80 bcf, above the 75 bcf forecast.

● Lower 48 output recovered to about 113.3 billion cubic feet per day.

● LNG feedgas averaged 18.5 bcfd in October, up from 17.9 bcfd in September.

US natural gas fell 2.70% to US$2.95 per million British thermal units (mmBtu) in Thursday's session on 29 October, as a larger-than-expected storage build and recovering output weighed on the market. Lower prices matter to producers such as EQT (NYSE:EQT), which sell gas at prices linked to the Henry Hub benchmark.

Natural gas is still up 5.41% on the week, though it is down 2.60% on the month, 20.04% since the start of the year and 25.50% from a year ago. The fall left prices at around their lowest in a week. Overseas gas is far dearer: Asian LNG, measured by JKM, is at US$32.36 per mmBtu, more than ten times the US price.

Supply Gains Ground on Demand

Gas is caught between rising supply and rising export demand. Production is recovering, storage is filling faster than forecast and mild weather is limiting heating demand, which pushes prices lower. Strong LNG exports provide a floor, but the pull of overseas buyers is limited by how much export capacity exists.

Storage Builds Beat Forecasts

The EIA reported that inventories rose by 80 billion cubic feet (bcf) last week, above forecasts of a 75 bcf build and faster than the previous week's 77 bcf injection. Total working gas reached 3.724 trillion cubic feet, 3.8% below year-earlier levels but 1% above the five-year average.

A build bigger than expected tells the market that supply is outrunning demand at a time when heating use is still low. Because stocks sit above the five-year average, there is little pressure to bid prices higher.

Milder Weather and Recovering Output

Output across the Lower 48 states recovered to about 113.3 billion cubic feet per day (bcfd), improving domestic supply availability. Forecasts for milder-than-normal temperatures through 13 November are also expected to limit heating demand, which adds to the downward pressure on prices.

LNG Exports Provide the Floor

Export demand is the main counterweight. Average feedgas flows to the nine major US export terminals rose to 18.5 bcfd in October, compared with 17.9 bcfd in September. Venture Global is targeting commercial operations for Plaquemines Phase 1 on 31 October, which would add capacity if it arrives on schedule.

The gap between US and global prices is wide, but US export capacity is finite, so overseas strength does not feed straight into a higher domestic price.

What It Means for Gas Producers and Exporters

EQT is one of the largest US gas producers. Producers typically sell into Henry Hub-linked prices less regional basis, so they are sensitive to both the benchmark and the discounts in producing regions. Appalachian spot prices were far below Henry Hub in mid-October, and hedging programmes can soften short-term moves.

Expand Energy (NASDAQ:EXE) is another of the largest US gas producers, with a similar exposure to the benchmark and regional discounts.

Cheniere Energy (NYSE:LNG) sits on the other side of the market. As a liquefaction operator, a large share of its capacity is sold under long-term contracts with fees that do not depend on day-to-day gas prices. It buys feedgas at Henry Hub-linked costs and sells uncontracted volumes at international prices, so a wide global spread can help its marketing margins while a lower Henry Hub price cuts its input cost.

Natural Gas Watch: Weather Models, Feedgas and Plaquemines

The near-term markers are weather model revisions for November, daily feedgas flows to export terminals, and the commissioning of Plaquemines Phase 1 targeted for 31 October. Weekly EIA storage data will show how quickly stocks are filling as the injection season winds down.

Colder-than-forecast weather, stronger feedgas, new LNG capacity or further disruption to global supply could support prices. Continued mild weather, output holding near record levels, an LNG plant outage or storage ending the injection season comfortably above average could keep them under pressure.