U.S. natgas edges up as higher air-conditioning use offsets fall in LNG exports

U.S. natural gas futures edged up on Tuesday as power generators burned more fuel to keep air conditioners humming despite a drop in liquefied natural gas (LNG) exports to Europe and Asia, where prices recently fell to record lows due to coronavirus demand destruction.

Front-month gas futures rose 2.2 cents, or 1.2%, to $1.796 per million British thermal units.

Data provider Refinitiv said average gas output in the U.S. Lower 48 states fell to 88.2 billion cubic feet per day (bcfd) so far in June, down from a one-year low of 89.3 bcfd in May and an all-time monthly high of 95.4 bcfd in November.

With the coming of summer weather, Refinitiv projected demand, including exports, would rise from 80.1 bcfd this week to 82.2 bcfd next week.

LNG buyers have canceled dozens of U.S. cargoes since April, when U.S. gas prices at the Henry Hub benchmark in Louisiana started trading higher than major European hubs for the first time in a decade. Analysts said those cancellations will likely increase in coming months because gas in the United States is expected to remain more expensive than in Europe through September.

With LNG exports falling, the amount of pipeline gas flowing to U.S. LNG export plants dropped to a 13-month low of 3.6 bcfd so far in June, down from an eight-month low of 6.4 bcfd in May and a monthly record high of 8.7 bcfd in February.

U.S. pipeline exports, however, started to rise as consumers crank up their air conditioners.

Refinitiv said pipeline exports to Canada averaged 2.3 bcfd so far in June, up from a seven-month low of 2.2 bcfd in May, while deliveries to Mexico hit 5.0 bcfd so far this month, up from a one-year low of 4.7 bcfd in May.