U.S. natural gas futures fell 5% on Tuesday on forecasts for lower demand into next week along with relatively high output.
Front-month gas futures for September delivery on the New York Mercantile Exchange fell 13.9 cents, or 5%, to $2.66 per million British thermal units (mmBtu) at 10:26 a.m. EDT (14:26 GMT).
The retreat in prices came despite expectations that a hotter-than-normal weather forecast until end-August, especially in Texas, would keep air conditioners humming, driving up power demand.
“Gas is getting tugged lower by broad-based cut in risk appetite but extended hot weather forecasts are a downside limiter,” analysts at Ritterbusch and Associates said in a note.
Data provider Refinitiv forecast U.S. gas demand, including exports, would rise from 103.1 billion cubic feet per day (bcfd) this week to 104.4 bcfd next week. But these numbers were lower from Monday’s forecast.
Refinitiv said average gas output in the Lower 48 states was 101.8 bcfd so far in August, nearly the same as the 101.8 bcfd in July, and not far from 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 12.4 bcfd so far in August, mainly due to reductions at Venture Global LNG’s Calcasieu facility in Louisiana and Cheniere Energy’s Corpus Christi, Texas facility.
That compares with a monthly record of 14.0 bcfd in April.
European gas prices rose, meanwhile, as concerns continued over possible strikes at Australian liquefied natural gas (LNG) facilities.
The Woodside and Chevron facilities manage nearly 11% of global LNG exports and a reduction in shipments could compel “Asian buyers to outbid their EU counterparts, likely turning to the US to secure adequate LNG cargoes”, analysts at SEB group said in a note.
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.
(Reporting by Harshit Verma in Bengaluru; Editing by Bernadette Baum, Jonathan Oatis and Ed Osmond)