U.S. natural gas futures fell about 3% on Friday on forecasts for less demand next week than previously expected due in part to a drop in the amount of gas flowing to liquefied natural gas (LNG) export plants and a drop in European gas prices.
That price decline came despite lower U.S. output in recent weeks and forecasts for the weather to remain hot through early July, especially in Texas.
The Electric Reliability Council of Texas (ERCOT), the state’s power grid operator, again projected electric use would break records, this time Monday-Tuesday, June 26-27.
ERCOT also projected power use would reach record highs this week but demand fell short of the record after storms and storm-related power outages reduced usage and consumers heeded the grid operator’s June 20th call to conserve energy.
Regardless of when demand sets a new all-time high, the heat should boost the amount of gas generators burn to produce power for air conditioning since Texas gets most of its electricity from gas-fired plants.
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 6.9 cents, or 2.7%, to $2.539 per million British thermal units (mmBtu) at 9:33 a.m. EDT (1333 GMT).
That put the contract down about 4% for the week after it gained about 17% last week.
Around the world, gas prices at the Dutch Title Transfer Facility (TTF) benchmark in Europe plunged about 12% to a one-week low near $10 per mmBtu.
SUPPLY AND DEMAND
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.
Meteorologists forecast the weather in the Lower 48 states would turn mostly hotter than normal from June 24-July 8.
With hot weather coming, Refinitiv forecast U.S. gas demand, including exports, would rise from 94.7 bcfd this week to 97.8 bcfd next week and 101.5 bcfd in two weeks. The forecast for next week was lower than Refinitiv’s outlook on Thursday.
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 Nick Zieminski)