US natural gas futures fell around 4% on Monday on a rise in output, coupled with a decline in gas flows to LNG export plants.
The price drop came despite forecasts for more demand this week than previously expected.
Gas futures for June delivery on the New York Mercantile Exchange (NYMEX) fell 14.9 cents, or 3.9%, to settle at $3.646 per MMBtu. On Friday, the contract closed at its highest since 9th April.
However, with futures up about 29% over the previous two weeks, speculators last week boosted their net long NYMEX futures and options positions and Intercontinental exchanges for the first time in nine weeks, according to the US Commodity Futures Trading Commission's Commitments of Traders report.
Analysts, speaking with Reuters, said mostly mild weather should keep heating and cooling demand low in the coming week, allowing utilities to continue injecting more gas into storage than normal for this time of year.
Gas stockpiles were already about 3% above the five-year (2020/2024) normal.
Financial firm LSEG said average gas output in the Lower 48 US states fell to 103.7 bill cu ft per day thus far in May, down from a monthly record of 105.8 bill in April.
On a daily basis, gas output was on track to slip to a preliminary 103.4 bill cu ft per day on Monday, down from a one-week high of 104.4 bill on 10th May and up from a 10-week low of 102.7 bill on 6th May.
That compares with a daily record high of 107.4 bill cu ft per day on 18th April.
Looking ahead, analysts said the roughly 11% drop in US crude futures thus far this year should prompt drillers to cut back on oil production.
Any decline in oil production would ultimately reduce the amount of gas extracted that is associated with the oil output. About 37% of US gas production comes from associated gas, according to federal energy data.
Over time, analysts said any reduction in associated gas output should increase gas prices.
Meteorologists projected temperatures in the Lower 48 states would remain mostly warmer than normal through 27th May.
With warmer weather starting to boost air conditioning use, LSEG forecast average gas demand in the Lower 48, including exports, will rise from 97 bill cu ft per day this week to 98.2 bill next week.
The average amount of gas flowing to the eight big LNG export plants operating in the US fell to $15.1 bill cu ft per day thus far this month, down from a monthly record of 16 bill cu ft in April.
The LNG feedgas decline this month was mostly due to reductions for maintenance at Cameron LNG's 2 bill cu ft per day plant in Louisiana and Cheniere Energy's 3.9 bill cu ft Corpus Christi plant under construction and in operation in Texas, and a one-day outage at Freeport LNG's 2.1 bill cu ft plant in Texas on 6th May.
