U.S. natural gas futures slid about 2% on Friday on forecasts for lower demand this week and next and expectations the extended shutdown of the Freeport liquefied natural gas (LNG) export plant in Texas would allow utilities to quickly rebuild low U.S. gas stockpiles.
That price decline came despite record power demand in Texas, forecasts for much higher U.S. gas demand in two weeks as the weather turns hotter, and small declines in U.S. gas output in recent days.
The Freeport shutdown on June 8 reduced the amount of U.S. gas available to the rest of the world, especially in Europe where most U.S. LNG has gone as countries there wean themselves off Russian energy after Moscow invaded Ukraine.
Gas prices at the European benchmark Title Transfer Facility in the Netherlands were up about 7% on Friday after Russia reduced pipeline exports to Europe.
Analysts said leaving more gas in the United States should give utilities a chance to rebuild extremely low stockpiles more quickly. Freeport, the second-biggest U.S. LNG export plant, consumes about 2 billion cubic feet per day (bcfd) of gas, so a 90-day shutdown would make about 180 billion cubic feet (bcf) more gas available to the U.S. market.
Front-month gas futures for July delivery on the New York Mercantile Exchange (NYMEX) fell 13.6 cents, or 1.8%, to $7.328 per million British thermal units (mmBtu) at 9:26 a.m. EDT (1326 GMT).
For the week, the contract was down 17% after rising 4% last week.
With the U.S. Federal Reserve expected to keep raising interest rates, open interest in NYMEX futures fell on Thursday to its lowest since September 2016 for a sixth day in a row as investors continued to cut back on risky assets.
U.S. gas futures were still up about 97% so far this year as much higher prices in Europe and Asia keep demand for U.S. 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 $39 per mmBtu in Europe and $35 in Asia.
Russia cut pipeline exports to Europe to 3.8 bcfd on Thursday from 4.7 bcfd on Wednesday 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 11.6 bcfd in June 2021.
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Data provider Refinitiv said average gas output in the U.S. Lower 48 states slid to 94.8 bcfd so far in June from 95.2 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 92.5 bcfd this week to 93.5 bcfd next week and 98.4 bcfd in two weeks. The forecasts for this week and next week were lower than Refinitiv’s outlook on Thursday.
Power demand in Texas hit a new all-time high on Thursday and will likely break that record again on Friday and Monday as homes and businesses keep their air conditioners cranked up to escape a lingering heat wave.
The amount of gas flowing to U.S. LNG export plants fell from an average of 12.5 bcfd in May to 11.6 bcfd so far in June due to the Freeport outage, according to 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.