U.S. natural gas futures held near a four-week low on Thursday as the market waits for direction from a federal report expected to show last week’s storage build was smaller-than-usual as power generators burned lots of gas to produce power during a heat wave.
That heat was still baking the U.S. West. California’s power grid urged customers to conserve energy for a ninth day in a row on Thursday as homes and businesses crank up their air conditioners to escape a brutal heat wave lingering over the drought-stricken region since the start of September.
Analysts forecast U.S. utilities added 54 billion cubic feet (bcf) of gas to storage during the week ended Sept. 2. That compares with an increase of 48 bcf in the same week last year and a five-year (2017-2021) average increase of 65 bcf.
If correct, last week’s increase would boost stockpiles to 2.694 trillion cubic feet (tcf), or 12.5% below the five-year average of 3.043 tcf for this time of the year.
The small storage increase came despite the ongoing outage at the Freeport liquefied natural gas (LNG) export plant in Texas, which has left more gas in the United States for utilities to inject into stockpiles for next winter.
Freeport, 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 LNG expects the facility to return to at least partial service in early to mid-November.
Front-month gas futures fell 2.7 cents, or 0.3%, to $7.815 per million British thermal units (mmBtu) at 8:53 a.m. EDT (1253 GMT), putting the contract on track for its lowest close since Aug. 8.
That also put the front-month on track to decline for a fourth day in a row for the first time since December 2021 and kept it in technically oversold territory with a relative strength index (RSI) below 30 for a third consecutive day for the first time since early July.
So far this year, gas futures were up about 110% 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 Feb. 24 invasion of Ukraine.
Gas was trading around $60 per mmBtu in Europe and $55 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 – averaged just 1.4 bcfd so far in September, down from 2.5 bcfd in August and 10.8 bcfd in September 2021.
U.S. gas futures lag far behind global prices because the United States is the world’s top producer with all the fuel it needs for domestic use, while capacity constraints and the Freeport outage prevents the country from exporting more LNG.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 99.2 bcfd so far in September from a record 98.0 bcfd in August.
With cooler weather coming, Refinitiv projected average U.S. gas demand, including exports, would slide from 97.4 bcfd this week to 93.3 bcfd next week. Those forecasts were higher than Refinitiv’s outlook on Wednesday.
The average amount of gas flowing to U.S. LNG export plants rose to 11.2 bcfd so far in September from 11.0 bcfd in August. 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.