U.S. natural gas futures slipped on Thursday, tracking a retreat in European gas prices ahead of a federal report expected to show last week’s storage build was smaller than usual for this time of year as hotter than normal weather boosted cooling demand.
Front month gas futures for September delivery on the New York Mercantile Exchange were down 8.2 cents, or 2.8%, to $2.88 per million British thermal units (mmBtu) at 09:55 a.m. EDT (1355 GMT), after hitting a five-month peak on Wednesday.
Analysts forecast that U.S. utilities likely added 25 billion cubic feet (bcf) of natural gas into storage during the week ended Aug. 4. That compares with a 44-bcf injection during the same week a year ago and a five-year (2018-2022) average increase of 46 bcf.
If correct, last week’s increase would lift stockpiles to 3.026 trillion cubic feet (tcf), 21.3% above the same week a year ago and 11% above the five-year average.
Dutch and British wholesale gas prices retreated from a two-month intraday high the previous day after concerns faded over tight liquefied natural gas (LNG) supply due to possible strikes at Australian facilities.
“Actual strike activity remains uncertain and, as a result, European prices have come off…restricting upside price follow-through in the US,” analysts at energy consulting firm Ritterbusch and Associates said in a note.
The analysts said “a sizable storage surplus” was bearish, but it was expected to decline over the month as strong gas demand reduces it.
Power demand in Texas hit an all-time high on Wednesday and will likely break that record again this week as homes and businesses keep their air conditioners cranked up during the lingering heatwave, according to forecasts by the Electric Reliability Council of Texas (ERCOT), the state’s power grid operator.
Extreme heat boosts the amount of gas burned 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%), federal energy data showed.
Meteorologists forecast the weather in the lower 48 states will remain hotter than normal through at least Aug. 25.
Data provider Refinitiv forecast U.S. gas demand, including exports, would rise from 103.0 billion cubic feet per day (bcfd) this week to 104.6 bcfd next week as power generators burn more of the fuel and exports rise. Those numbers were slightly lower from Wednesday’s forecast.
Refinitiv said average gas output in the U.S. lower 48 states was 101.9 bcfd so far in August, nearly the same as the 101.8 bcfd in July. That compares with a monthly record of 102.2 bcfd in May.
Gas flows to the seven big U.S. LNG export plants have fallen from an average of 12.7 bcfd in July to 12.3 bcfd so far in August, mainly due to reductions at Cheniere Energy’s Corpus Christi, Texas facility and Venture Global LNG’s Calcasieu facility in Louisiana. That compares with a monthly record of 14.0 bcfd in April.
The U.S. is on track to become the world’s biggest LNG supplier in 2023 – ahead of recent leaders Australia and Qatar – as higher global prices feed demand for U.S. exports due to supply disruptions and sanctions linked to the war in Ukraine.
In 2022, roughly 69%, or 7.2 bcfd, of U.S. LNG exports went to Europe as shippers diverted cargoes from Asia to get higher prices. In 2021, when prices in Asia were higher, just 35%, or about 3.3 bcfd, of U.S. LNG exports went to Europe.
With the return of higher gas prices in Asia this year, analysts said they expect U.S. LNG exports to Asia will increase. But that has not happened yet. Just 19%, or 2.1 bcfd, of U.S. LNG exports went to Asia during the first half of 2023, while 70%, or 8.0 bcfd, went to Europe.
(Reporting by Harshit Verma in Bengaluru; editing by Barbara Lewis)