Front-month gas futures for August delivery on the New York Mercantile Exchange were up 3.8 cents, or 1.6%, to $2.454 per million British thermal units at 8:55 a.m. EDT (1255 GMT).
The U.S. National Hurricane Center (NHC) forecast Tropical Storm Barry, which formed on Thursday in the Gulf of Mexico, would make landfall in central Louisiana on Friday, putting it near two of the nation’s four operating LNG export terminals – Cheniere Energy Inc’s Sabine Pass in Louisiana and Sempra Energy’s Cameron in Louisiana. {nL2N24C1RR]
The amount of gas flowing to Cheniere’s Sabine Pass dropped to a 13-week low of 2.9 billion cubic feet per day (bcfd) on Thursday and Friday from an average of 3.6 bcfd over the prior seven days, according to data provider Refinitiv.
Officials at Cheniere would not comment on the decline, but noted they did not expect the tropical storm would have a major impact on operations.
Analysts and traders said it was possible the flows to Sabine declined due to a drop in the amount of gas flowing on the pipes along the Gulf Coast after several producers shut-in their offshore oil and gas wells and platforms ahead of Tropical Storm Barry.
Gas output in the Lower 48 U.S. states could drop to a seven-week low of 87.2 bcfd on Friday from a record high 91.1 bcfd a week ago on July 5. That compares with an average of 82.5 bcfd during this week last year.
Most of the production declines were in the offshore Gulf of Mexico region where producers were expected to cut output to just 1.3 bcfd on Friday due to Tropical Storm Barry from over 3.1 bcfd a week ago.
Some analysts also said LNG vessels would likely ride the storm out in the Gulf rather than risk sitting at a dock. There has been at least one vessel at Sabine Pass every day from June 19-July 11. There was, however, no vessel at Sabine on Friday, according to Refinitiv ship tracking data.
There were four LNG tankers in the northern Gulf of Mexico – most of them waiting to enter Sabine Pass, according to ship tracking data.
With the approach of peak summer heat in late July, Refinitiv projected demand in the lower 48 would rise to 90.6 bcfd next week and 91.8 bcfd in two weeks as power plants burn more gas to keep air conditioners humming, up from 89.6 bcfd this week. The forecast for next week was a little higher than Refinitiv’s 90.2 bcfd estimate on Thursday.
Analysts said utilities likely added 65 billion cubic feet (bcf) of gas to inventories during the week ended July 12. That compares with an increase of 46 bcf during the same week last year and a five-year (2014-18) average increase of 63 bcf for the period.
If correct, the increase would boost stockpiles to 2.536 trillion cubic feet (tcf), 5.2% below the five-year average of 2.676 tcf for this time of year.
That would be the 18th week in a row storage increases were bigger or decreases were smaller than the five-year average, the most since November 2014 when utilities added more gas or removed less gas than usual for a record 30 consecutive weeks, according to federal energy data going back to 2010. Analysts, however, forecast hot weather through the end of July would likely boost cooling demand enough to cause builds to be smaller than normal in future weeks.
The amount of gas in storage has remained below the five-year average since September 2017. It peaked at 33% under the five-year average in March 2019. Analysts expect inventories will reach a near-normal 3.7 tcf by the end of the summer injection season on Oct 31.