U.S. natural gas futures eased about 1% to a fresh three-week low on Monday on rising output and forecasts for less hot weather over the next two weeks than previously expected.
That lack of price movement came even though the country’s overall weather will remain hotter-than-normal (just not as hot as previously excepted last week) through the start of August, especially in Texas.
Power demand in Texas will likely hit record highs again this week as homes and businesses keep their air conditioners cranked up to escape another brutal heatwave, according to the Electric Reliability Council of Texas (ERCOT), the state’s power grid operator.
Extreme heat boosts the amount of gas generators burn to produce power for cooling, especially in Texas, which 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 August delivery fell 2.4 cents, or 1.0%, to $2.515 per million British thermal units (mmBtu) at 9:25 a.m. EDT (1325 GMT), putting the contract on track for its lowest close since June 20 for a third day in a row.
Even though prices fell for a second week in a row last week, speculators boosted their net long gas futures and options positions on the New York Mercantile and Intercontinental Exchanges for a fifth week to their highest since April 2022, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.
But, a lack of big price moves in recent weeks cut historic or actual 30-day close-to-close futures volatility to 52.2%, the lowest level since April 2022 for a fifth day in a row.
On a daily basis, historic volatility hit a record high of 177.7% in February 2022 and a record low of 7.3% in June 1991. Historic volatility has averaged 84.5% so far this year, a record high of 92.8% in 2022 and a five-year (2018-2022) average of 57.9%.
SUPPLY AND DEMAND
Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 101.7 billion cubic feet per day (bcfd) so far in July, up from 101.0 bcfd in June. That compares with a monthly record of 101.8 bcfd in May.
Meteorologists forecast the weather in the Lower 48 states would remain hotter-than-normal through at least Aug. 1.
With hotter weather coming, Refinitiv forecast U.S. gas demand, including exports, would rise from 108.7 bcfd this week to 109.1 bcfd next week.
Gas flows to the seven big U.S. LNG export plants rose to an average of 12.7 bcfd so far in July from 11.6 bcfd in June. That, however, remained well below the monthly record of 14.0 bcfd in April due to ongoing maintenance at several facilities, including Cheniere Energy Inc’s Sabine Pass in Louisiana and Corpus Christi in Texas.
(Reporting by Scott DiSavino Editing by Nick Zieminski)