U.S. natural gas futures fell over 5% on Monday on forecasts for slightly lower demand over the next two weeks than previously expected and a slow increase in output after prices jumped to a seven-month high last week.
Traders noted futures soared last week because the market was no longer concerned prices will have to drop later this year to encourage producers to shut wells to prevent stockpiles from reaching tank tops. That is because power generators burned record amounts of gas during the hot summer to keep air conditioners humming and LNG exports are now picking up.
Front-month gas futures fell 11.6 cents, or 5.2%, to $2.122 per million British thermal units at 12:50 p.m. EDT (1650 GMT). On Friday, the contract closed at its highest since Dec. 26.
Speculators last week boosted their long positions on the NYMEX for an eighth week in a row to their highest since November 2018 on expectations energy demand will rise as the economy rebounds when state governments lift more coronavirus-linked lockdowns.
Data provider Refinitiv said average U.S. production rose to 88.7 billion cubic feet per day from 88.1 bcfd in July. That is still well below November’s all-time monthly high of 95.4 bcfd.
U.S. LNG exports in August were on track to rise for the first time in six months. Pipeline gas flowing to the plants climbed to 4.1 bcfd in August from a 21-month low of 3.3 bcfd in July, when buyers canceled dozens of cargoes – the most in a month.
Refinitiv projected U.S. demand, including exports, will rise from an average of 89.1 bcfd this week to 90.0 bcfd next week. But that is lower than Refinitiv’s outlook on Friday because last week’s higher gas prices will cause some power generators to burn more coal instead of gas.