U.S. natural gas futures were little changed on Monday as record power demand in Texas offset a forecast decline in gas use across the rest of the country this week.
Power demand in Texas hit an all-time high on Sunday and will likely break that record on Monday as economic growth boosts usage and homes and businesses keep air conditioners cranked up to escape a lingering heatwave.
Front-month gas futures for July delivery on the New York Mercantile Exchange (NYMEX) rose 3.6 cents, or 0.4%, to $8.886 per million British thermal units (mmBtu) at 9:31 a.m. EDT (1331 GMT).
With the U.S. Federal Reserve expected to keep raising interest rates in coming months to reduce inflation, open interest in NYMEX futures fell to its lowest since September 2016 for a second day in a row on Friday as investors cut back on risky assets like commodities.
In the spot market, next-day power for Monday at the Mid-Columbia hub in the Pacific Northwest dropped to 30 cents per megawatt hour, its lowest since June 2020, due to an over abundance of cheap hydropower that is causing other power plants to reduce output.
U.S. gas futures were up about 137% 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 $26 per mmBtu in Europe and $23 in Asia.
U.S. futures 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 slid to 95.0 billion cubic feet per day (bcfd) so far in June from 95.1 bcfd in May. That compares with a monthly record of 96.1 bcfd in December 2021.
With hotter weather coming, Refinitiv projected average U.S. gas demand, including exports, would rise from 92.2 bcfd this week to 92.9 bcfd next week. The forecast for this week was lower than Refinitiv’s outlook on Friday.
The average amount of gas flowing to U.S. LNG export plants fell to 11.9 bcfd so far in June from 12.5 bcfd in May, according to data from Refinitiv. That compares with a monthly record of 12.9 bcfd in March. The seven big U.S. export plants can turn about 13.6 bcfd of gas into LNG.
On a daily basis, LNG feedgas fell from a recent high of 13.0 bcfd on June 4 to a near 16-week low of 10.5 bcfd on Sunday with the shutdown of the Freeport export plant in Texas on June 8. Freeport was pulling in about 2.0 bcfd before the shutdown.
The United States, which will not be able to produce much more LNG anytime soon, has worked with allies to divert exports from elsewhere to Europe to help European Union countries and others break dependence on Russian gas.
Gas stockpiles in Northwest Europe – Belgium, France, Germany and the Netherlands – were about 8% below the five-year (2017-2021) average for this time of year, and down from 39% below the five-year norm in mid-March, according to Refinitiv. Storage was currently about 48% of full capacity.
That is much healthier than U.S. inventories, which were around 15% below their five-year norm. Analysts noted the shutdown of Freeport would leave more gas in the United States for utilities and other to inject into storage and rapidly reduce the U.S. stockpile deficit.