U.S. natural gas futures on Tuesday fell more than 3% to their lowest in over a week on forecasts for less hot weather over the next two weeks than previously forecast and a slow return of production from the Gulf of Mexico after Tropical Storm Barry.
Front-month gas futures for August delivery on the New York Mercantile Exchange were down 7.6 cents, or 3.2%, to $2.332 per million British thermal units at 8:23 a.m. EDT (1223 GMT), their lowest since July 5.
With the weather expected to cool after peaking this coming weekend, data provider Refinitiv projected demand in the Lower 48 U.S. states would slide to 91.0 billion cubic feet per day (bcfd) next week from 91.3 bcfd this week as power plants do not need to burn as much gas to keep air conditioners humming.
That is lower than Refinitiv’s forecasts on Monday of 92.0 bcfd for next week and 91.7 bcfd for this week. But it still 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.
With the remnants of Tropical Storm Barry currently located over Missouri, energy firms were returning their wells and platforms in the Gulf of Mexico to service. Barry hit the central Louisiana coast as a tropical storm on Saturday.
Gas production from the offshore Gulf of Mexico was expected to rise to 1.3 bcfd on Tuesday from a low of 1.2 bcfd on Sunday and Monday, according to Refinitiv. That compares with a high of 3.1 bcfd during the first week of July.
Output in the Lower 48 states, meanwhile, has increased every day since falling to a seven-week low of 87.8 bcfd on July 11 due primarily to the Gulf of Mexico shut-ins, rising to 88.3 bcfd on Monday, according to Refinitiv. That compares with an all-time daily high of 91.1 bcfd on July 5 and an average of 82.1 bcfd during this week last year.
The amount of gas flowing to the nation’s liquefied natural gas (LNG) export terminals, meanwhile, was expected to reach a near record high 6.2 bcfd on Tuesday as units at several new terminals start to enter service, including Cheniere Energy Inc’s Corpus Christi, Sempra Energy’s Cameron, Freeport LNG’s Freeport in Texas and Kinder Morgan Inc’s Elba in Georgia.
The amount of gas flowing to U.S. LNG export terminals peaked at 6.3 bcfd on Sunday and was expected to break that record by the end of this week, according to Refinitiv estimates.
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.