U.S. natural gas futures on Monday pulled back over 1% from a six-week high hit last week on forecasts for less hot weather over the next two weeks than previously forecast despite continued low production due to Tropical Storm Barry.
Front-month gas futures for August delivery on the New York Mercantile Exchange (NYMEX) were down 3.2 cents, or 1.3%, at $2.42 per million British thermal units at 9 a.m. EDT (1300 GMT). On Friday, the contract closed at its highest since May 31.
Gas speculators, meanwhile, trimmed their net short positions last week on the NYMEX and Intercontinental Exchange to 150,710 contracts in the week to July 9, down from 163,660 in the prior week, which was their highest since November 2015, according to data from the U.S. Commodity Futures Trading Commission (CFTC). That move came even though speculators cut their longs on the NYMEX to the lowest since December 2011.
The remnants of Barry, which is now a tropical depression, were dropping rain on Arkansas, Tennessee, Missouri, Mississippi, Louisiana and Kentucky. Barry hit the central Louisiana coast as a tropical storm on Saturday.
As the storm approached the coast last week, energy companies shut in their oil and gas wells and platforms in the Gulf of Mexico, cutting gas output in the region to as low as 1.2 billion cubic feet per day (bcfd) on Sunday from around 3.1 bcfd in the first week of July, according to data provider Refinitiv.
Those reductions in the Gulf of Mexico cut gas output in the Lower 48 U.S. states to a seven-week low of 87.8 bcfd last week from a record high 91.1 bcfd a week earlier on July 5. That compares with an average of 82.1 bcfd during this week last year.
The amount of gas flowing to Cheniere Energy Inc’s Sabine Pass LNG export facility in Louisiana, meanwhile, was expected to drop to 3.1 bcfd on Monday from a one-week high of 3.7 bcfd over the weekend. Last week, the amount of gas flowing to Sabine fell to a 13-week low of 2.9 bcfd on Thursday, according to Refinitiv.
Officials at Cheniere would not comment on the decline but noted they did not expect Tropical Storm Barry to have a major impact on operations.
Analysts and traders said it was possible flows to Sabine declined due to a reduction in the amount of gas flowing in the pipes on the Gulf Coast due to offshore production shut-ins for Barry.
Others said the amount of gas flowing to Sabine was likely down because some LNG vessels waited to see where the storm would make landfall before entering port. Refinitiv said no vessels took cargoes from Sabine between July 11-13 after taking cargoes every day from June 20-July 10. Two vessels were loaded on Sunday and four were waiting in the Gulf of Mexico outside of Sabine.
With the approach of peak summer heat in late July, Refinitiv projected demand in the Lower 48 would rise to 91.7 bcfd this week and 92.0 bcfd next week as power plants burn more gas to keep air conditioners humming, up from 89.5 bcfd last week.
That was a little higher than Refinitiv’s forecasts on Friday of 90.6 bcfd for this week and 91.8 bcfd for next week.
That keeps power generators on track to burn more than 40 bcfd of gas on average this month, which would break the sector’s 39.9 bcfd monthly record set in July 2018, according to federal energy projections.
(Reporting by Scott DiSavino; editing by Jonathan Oatis)