U.S. natural gas futures fell about 3% to a one-week low on forecasts for less demand and less hot weather over the next two weeks than previously expected.
In the spot market, however, power and gas prices in some markets rose to their highest in months as homes and businesses crank up their air conditioners to escape a lingering heat wave that is boosting power demand and stressing electric grids across the country.
That gas futures price decline came ahead of a federal report expected to show last week’s storage build was much smaller than usual for this time of year after hot weather boosted cooling demand last week too.
Analysts forecast U.S. utilities added 19 billion cubic feet (bcf) of gas into storage during the week ended July 21. That compares with an increase of 18 bcf in the same week last year and a five-year (2018-2022) average increase of 31 bcf.
If correct, last week’s increase would boost stockpiles to 2.990 trillion cubic feet (tcf), or 13.2% above the five-year average of 2.642 tcf for the time of year.
On its next to last day as the front-month, gas futures for August delivery on the New York Mercantile Exchange fell 9.1 cents, or 3.4%, to $2.574 per million British thermal units (mmBtu) at 9:18 a.m. EDT (1318 GMT), putting the contract on track for its lowest close since July 17.
Futures for September, which will soon be the front-month, were down about 7 cents to $2.63 per mmBtu.
The premium of futures for September over August were on track to hit a record high for a second day in a row on Thursday. That is a big change from where the spread usually trades. Over the past four years, September has traded at a premium to August on just 14 occasions – all of them in June and July of 2023.
In the spot market, next-day power prices for Thursday soared to their highest since December 2022 at the Palo Verde hub in Arizona and their highest since February 2023 at the PJM Western Hub, which covers an area from northwestern Pennsylvania to Washington, D.C.
Next-day gas for Thursday at the Southern California Border, meanwhile, nearly doubled to $12.55 per mmBtu, their highest since March 2023.
SUPPLY AND DEMAND
Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 101.5 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.
Even though the weather will be less hot over the next two weeks than previously expected, meteorologists forecast the weather in the Lower 48 states will remain hotter than normal through at least Aug. 11.
Refinitiv forecast U.S. gas demand, including exports, would rise from 104.7 bcfd this week to 105.7 bcfd next week. Those forecasts were lower than Refinitiv’s outlook on Wednesday.
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 is still well below the monthly record of 14.0 bcfd in April due to ongoing maintenance at several facilities.
On a daily basis, however, LNG feedgas fell to a preliminary two-week low of 12.2 bcfd due to recent reductions at Cheniere Energy’s Sabine Pass in Louisiana and the shutdown of the Columbia pipeline to Berkshire Hathaway Energy’s Cove Point in Maryland.
The amount of gas flowing to Cove Point was on track to reach 0.6 bcfd on Thursday, the same as Wednesday, after dropping to 0.5 bcfd on Tuesday due to the Columbia pipe fire. That compares with feedgas of around 0.8 bcfd since November.
(Reporting by Scott DiSavino; editing by Jonathan Oatis)