U.S. natural gas futures eased about 1% on Friday despite forecasts for demand to rise over the next two weeks with the coming of warmer weather, as producers pull record amounts of the fuel out of the ground.
The price drop also came despite a smaller-than-expected storage build last week, record global prices and hot weather boosting U.S. spot prices to multi-year highs, which combined helped push gas futures to 14-year highs earlier this week.
One factor that has weighed on gas prices all summer was the ongoing outage at the Freeport, Texas liquefied natural gas (LNG) export plant, which has left more gas for U.S. utilities to inject into stockpiles for next winter.
The second-biggest U.S. LNG export plant was consuming about 2 billion cubic feet per day (bcfd) of gas before it shut on June 8. Freeport expects it to return to at least partial service in early October.
Front-month gas futures fell 11 cents, or 1.2%, to $9.078 per million British thermal units (mmBtu) at 8:28 a.m. EDT (1228 GMT).
For the week, the front-month was on track to rise about 3% after gaining 9% last week.
With hot weather moving into the U.S. Northeast, spot gas prices for Friday at the Dominion South hub in Pennsylvania rose to their highest since February 2014 for a second day in a row.
In Alberta, meanwhile, producers were having a tough time getting gas out of the province due to a lack of pipeline capacity, maintenance on existing pipes and rising production. Prices for Friday at the AECO hub in Alberta plunged 73% to just 74 cents per mmBtu, their lowest since September 2019.
So far this year, gas futures were up about 143% as higher prices in Europe and Asia keep demand for U.S. LNG exports strong. Global gas prices have soared due to supply disruptions and sanctions linked to Russia’s invasion of Ukraine on Feb. 24.
Global gas prices were on track to close at record levels around $73 per mmBtu in Europe and $58 in Asia.
Russian gas exports via the three main lines into Germany – Nord Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route – held near 2.5 bcfd so far in August, down from an average of 2.8 bcfd in July and 10.4 bcfd in August 2021.
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Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 97.3 bcfd so far in August from a record 96.7 bcfd in July.
With warmer weather expected, Refinitiv projected average U.S. gas demand, including exports, would rise from 95.5 bcfd this week to 96.8 bcfd next week and 97.2 bcfd in two weeks. These were similar to Refinitiv’s forecasts on Thursday.
The average amount of gas flowing to U.S. LNG export plants held at 10.9 bcfd so far in August, the same as July. That compares with a monthly record of 12.9 bcfd in March. The seven big U.S. export plants can turn about 13.8 bcfd of gas into LNG.
The reduction in exports from Freeport is a problem for Europe, where most U.S. LNG has gone this year as countries there wean themselves off Russian energy.
Gas stockpiles in northwest Europe – Belgium, France, Germany and the Netherlands – were about 1% above their five-year (2017-2021) average for this time of year, according to Refinitiv. Storage was currently at about 76% of capacity.
That is much healthier than U.S. gas inventories, which were 367 billion cubic feet, or 13%, below their five-year norm, the biggest deficit since April 2019.