U.S. natural gas futures slid about 3% to a one-week low on Tuesday on forecasts for less demand over the next two weeks than previously expected.
Front-month gas futures for July delivery fell 22.9 cents, or 2.6%, to $8.498 per million British thermal units (mmBtu) at 9:42 a.m. EDT (1342 GMT), putting the contract on track for its lowest close since May 20.
In May, the contract was up about 17%, putting it up for a third month in a row for the first time since September 2021.
U.S. gas futures were up about 127% so far this year as much higher prices in Europe and Asia keep demand for U.S. liquefied natural gas (LNG) exports strong, especially since Russia’s Feb. 24 invasion of Ukraine stoked fears Moscow might cut gas supplies to Europe.
Gas was trading around $29 per mmBtu in Europe and $23 in Asia.
U.S. futures continue to lag far behind global prices because the United States is the world’s top producer with all the gas it needs for domestic use, while capacity constraints inhibit additional LNG exports.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states climbed to 95.0 billion cubic feet per day (bcfd) so far in May from 94.5 bcfd in April. That compares with a monthly record of 96.1 bcfd in November 2021.
Refinitiv projected average U.S. gas demand, including exports, would rise from 86.0 bcfd this week to 86.9 bcfd next week. Those forecasts were lower than Refinitiv’s outlook on Friday before the long U.S. Memorial Day holiday weekend.
The average amount of gas flowing to U.S. LNG export plants rose to 12.5 bcfd so far in May from 12.2 bcfd in April. That compares with a monthly record of 12.9 bcfd in March. The United States can turn about 13.6 bcfd of gas into LNG.
The United States, which will not be able to produce much more LNG soon, has worked with allies to divert exports from elsewhere to Europe to help European Union countries and others break dependence on Russian gas after Russia’s invasion of Ukraine.
Russia boosted exports to Europe to 7.5 bcfd on Monday from 7.4 bcfd on Sunday on the three mainlines into Germany: North Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route. That compares with an average of 11.9 bcfd in May 2021.
Gas stockpiles in Northwest Europe – Belgium, France, Germany and the Netherlands – were about 10% below the five-year (2017-2021) average for this time of year, down from 39% below the five-year norm in mid-March, according to Refinitiv. Storage was currently about 43% of full capacity.
That is healthier than U.S. inventories, which were around 15% below their five-year norm.
Traders noted U.S. utilities likely injected a lower than usual amount of gas into storage for a second week in a row last week in part because low wind power forced generators to burn more gas to keep the lights on.
Wind and gas produced about 12% and 37% of U.S. power last week, respectively, the same as in the prior week and down from a recent high of 16% for wind and a recent low of 33% for gas, according to federal data.