U.S. natural gas futures slipped more than 4% on Tuesday, tracking a retreat in European rates, with prices hitting an over one-week low as supplies in the United States were seen rising.
On its first day as the front-month, gas futures for October delivery were down 40.5 cents, or 4.3%, to $8.93 per million British thermal units (mmBtu) by 10:01 a.m. EDT (1401 GMT), having dropped to their lowest level since Aug. 19.
Data provider Refinitiv said gas output in the U.S. Lower 48 states rose to 98.1 billion cubic feet per day (bcfd) on Monday, its highest since Aug. 8.
“The production and overall supply increased not only from natural gas production, but also from slightly higher Canadian imports,” said Robert DiDona of Energy Ventures Analysis.
“When you couple the current weather forecast, which did get a little warmer over the weekend, with the supply gains and then the European gas price sell-off, I think it’s just resulted in a little bit of profit taking.”
British and Dutch wholesale gas prices eased as Europe almost reached its target of gas inventories being 80% full. Gas was trading around $81 per mmBtu in Europe and $69 in Asia.
Europe was also gearing for a scheduled outage on the Nord Stream 1 pipeline, which runs under the Baltic Sea to Germany, for three days from Aug. 31 to Sep. 2, with market players concerned flows might not resume.
“This is an important time in the market in general and most years it comes with a fair amount of volatility…. We could see some surprise power demand from gas generation increases as we have this late summer heat wave that comes through the early part of September…. The possibility absolutely exists that we can rally $0.75 to $0.85 and touch $10 again,” DiDona said further.
Meanwhile, the restart delay at the fire-hit Freeport liquefied natural gas (LNG) export plant in Texas, leaves more fuel in the United States for utilities to refill storage.