U.S. natural gas futures eased about 1% on Thursday on forecasts for lower demand next week due in part to ongoing work at several U.S. liquefied natural gas (LNG) export terminals that is keeping the amount of gas flowing to the plants low.
The price decline also came ahead of a federal report expected to show a bigger-than-usual storage build last week when mild weather reduced the amount of gas that power generators burned to meet air conditioning demand.
Analysts forecast that U.S. utilities added 91 billion cubic feet (bcf) of gas into storage during the week ended June 16. That compared with an increase of 76 bcf in the same week last year and a five-year (2018-2022) average increase of 86 bcf.
If correct, last week’s increase would boost stockpiles to 2.725 trillion cubic feet (tcf), or 15.1% above the five-year average of 2.367 tcf for the time of year.
In Texas, the power grid operator again projected electric use would break a record – this time Sunday-Tuesday, June 25-27 – after actual usage so far this week fell short of ERCOT’s record-breaking forecasts as consumers heeded calls to conserve energy during the first heat wave of the summer.
Energy traders noted it would be very unusual for any power grid to break a peak demand record on a Sunday when many businesses are shut for the weekend. No matter whether ERCOT breaks the all-time high this weekend or later next week, traders noted the high demand will boost the amount of gas generators burn since Texas gets about half of its electricity from gas.
In 2022, about 49% of the state’s power came from gas-fired plants, with most of the rest from wind (22%), coal (16%), nuclear (8%) and solar (4%), according to federal energy data.
Front-month gas futures for July delivery on the New York Mercantile Exchange fell 1.8 cents, or 0.75%, to $2.579 per million British thermal units at 8:56 a.m. EDT (1256 GMT).
Data provider Refinitiv said average gas output in the U.S. Lower 48 states fell from a record 102.5 billion cubic feet per day (bcfd) in May to 101.5 bcfd so far in June due in part to ongoing pipeline maintenance in the Haynesville shale in Arkansas, Louisiana and Texas, and other basins.
The U.S. National Hurricane Center projected Tropical Storm Bret would remain a tropical storm as it moves west from the Atlantic Ocean into the Caribbean Sea before dissipating around Saturday.
The center also projected Tropical Depression Four would strengthen into a tropical storm over the next few days as it moves northwest in the Atlantic, reaching a few hundred miles (about 500 km) north of Puerto Rico by next Tuesday.
Meteorologists forecast the weather in the Lower 48 states would turn from near-normal now to hotter than normal from June 24-July 7.
With hot weather coming, Refinitiv forecast U.S. gas demand, including exports, would rise from 94.7 bcfd this week to 98.2 bcfd next week. The forecast for this week was higher than Refinitiv’s outlook on Wednesday, while its forecast for next week was lower.
U.S. exports to Mexico rose to an average of 6.6 bcfd so far in June from 6.2 bcfd in May. That compares with a monthly record high of 6.7 bcfd in June 2021.
Gas flows to the seven big U.S. LNG export plants fell to an average of 11.4 bcfd so far in June from 13.0 bcfd in May. That is well below the monthly record high of 14.0 bcfd in April due to maintenance at several facilities, including Cheniere Energy Inc’s Sabine Pass in Louisiana and Freeport LNG in Texas.
The record flows in April exceeded the 13.8 bcfd of gas the seven big plants can turn into LNG since the facilities also use some of the fuel to power equipment used to produce LNG.
(Reporting by Scott DiSavino; editing by Jonathan Oatis)