U.S. natural gas futures eased about 1% on Monday to a fresh 12-week low as producers keep pulling more gas out of the ground.
That small price decline came despite forecasts of record-breaking heat later this week, that could boost the amount of gas power generators burn to an all-time high.
At the same time, the amount of gas flowing to U.S. liquefied natural gas (LNG) export plants hit a seven-week high over the weekend with the return of all three liquefaction trains at Freeport LNG in Texas, after it shut for Hurricane Beryl in early July.
Analysts said the combination of higher gas use by power generators and LNG export plants could cause utilities to take the unusual step of pulling gas out of storage during a week in August for the first time since 2006.
There was currently about 17% more gas in storage than normal for this time of year.
Storage builds have been mostly smaller than usual in recent weeks, because several producers cut output earlier in the year after futures prices dropped to 3-1/2-year lows in February and March.
Higher prices in April and May, however, prompted some drillers, including EQT and Chesapeake Energy, to boost output.
But with prices down about 23% so far in July, some analysts think producers could reduce drilling activities again.
On its last day as the front-month, gas futures for August delivery on the New York Mercantile Exchange fell 1.6 cents, or 0.8%, to $1.990 per million British thermal units (mmBtu) by 9:45 a.m. EDT (1345 GMT), putting the contract on track for its lowest close since May 1 for a second day in a row.
That also put the front-month down for a fifth day and kept it in oversold territory for a second day in a row.
The September contract, which will soon be the front-month, held steady at around $2.04 per mmBtu, allowing its premium over August to rise to a record high for a second day.
SUPPLY AND DEMAND
Financial firm LSEG said gas output in the Lower 48 states rose to an average of 102.4 billion cubic feet per day (bcfd) so far in July, up from 100.2 bcfd in June and a 17-month low of 99.4 bcfd in May. U.S. output hit a monthly record of 105.5 bcfd in December 2023.
Meteorologists forecast temperatures across the Lower 48 states will average 83.5 degrees Fahrenheit (28.6 Celsius) on Aug. 1 and 83.9 F on Aug. 2, according to data from LSEG.
That would top the current record high average temperature of 83.0 F set on July 20, 2022, when power demand peaked at an all-time high of 742,600 megawatts, according to LSEG and federal energy data.
To keep air conditioners humming during that record heat, LSEG forecast power generators would burn about 54.8 bcfd of gas on Aug. 2, which would top the current all-time high of 54.1 bcfd reached on July 9 when generators had to burn more gas due to a lack of wind power.
But the amount of power generated by wind was on track to rise from 4% last week to around 10% this week.
With more heat coming, LSEG forecast average gas demand in the Lower 48, including exports, will rise from 105.6 bcfd this week to 111.7 bcfd next week.
On a daily basis, LNG feedgas rose to a preliminary seven-week high of 13.3 bcfd on Sunday with the return of the 2.1-bcfd Freeport.
Week ended Week ended Year ago Five-year
July 26 July 19 July 26 average
Forecast Actual July 26 U.S. weekly natgas storage change (bcf): +39 +22 +15 +33 U.S. total natgas in storage (bcf): 3,270 3,231 2,997 2,808 U.S. total storage versus 5-year average 16.5% 16.4%
Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five-Year
Last Year Average Average
2023 (2018-2022) Henry Hub 2.02 2.04 2.64 2.66 3.60 Title Transfer Facility (TTF) 10.37 10.14 9.58 13.04 14.39 Japan Korea Marker (JKM) 12.08 12.24 11.44 14.39 14.31
LSEG Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days Two-Week Total Forecast Current Day Prior Day Prior Year 10-Year 30-Year
Norm Norm U.S. GFS HDDs 3 3 1 2 3 U.S. GFS CDDs 262 256 229 207 199 U.S. GFS TDDs 259 259 230 209 204
LSEG U.S. Weekly GFS Supply and Demand Forecasts
Prior Week Current Next Week This Week Five-Year
Week Last Year (2019-2023)
Average For
Month U.S. Supply (bcfd) U.S. Lower 48 Dry Production 102.5 102.6 102.5 102.3 95.5 U.S. Imports from Canada 7.7 8.0 7.5 N/A 7.8 U.S. LNG Imports 0.0 0.0 0.0 0.0 0.1 Total U.S. Supply 110.3 110.5 110.0 N/A 112.5
U.S. Demand (bcfd) U.S. Exports to Canada 1.7 1.7 1.7 N/A 2.3 U.S. Exports to Mexico 7.3 7.1 7.1 N/A 6.1 U.S. LNG Exports 11.8 13.1 13.1 12.6 8.6 U.S. Commercial 4.4 4.4 4.4 4.4 4.5 U.S. Residential 3.5 3.6 3.6 3.5 3.6 U.S. Power Plant 47.9 46.6 52.5 48.3 43.3 U.S. Industrial 21.7 21.7 21.8 21.3 21.3 U.S. Plant Fuel 5.1 5.1 5.1 5.0 4.9 U.S. Pipe Distribution 2.3 2.2 2.4 2.2 2.2 U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1 Total U.S. Consumption 84.9 83.7 89.8 84.8 79.9 Total U.S. Demand 105.8 105.6 111.7 N/A 96.9
N/A is Not Available
U.S. Northwest River Forecast Center (NWRFC) at The Dalles Dam Current Day Prior Day 2023 2022 2021
% of Normal % of Normal % of Normal % of Normal % of Normal
Forecast Forecast Actual Actual Actual Apr-Sep 74 74 83 107 81 Jan-Jul 76 76 77 102 79 Oct-Sep 77 77 76 103 81
U.S. weekly power generation percent by fuel – EIA
Week ended Week ended 2023 2022 2021
Aug 2 Jul 26 Wind 10 4 10 11 10 Solar 6 5 4 3 3 Hydro 5 5 6 6 7 Other 1 1 2 2 2 Petroleum 0 0 0 0 0 Natural Gas 44 48 41 38 37 Coal 15 18 17 21 23 Nuclear 18 17 19 19 20
SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu) Hub Current Day Prior Day Henry Hub 1.98 2.00 Transco Z6 New York 1.34 1.39 PG&E Citygate 3.29 3.49 Eastern Gas (old Dominion South) 1.23 1.27 Chicago Citygate 1.69 1.77 Algonquin Citygate 1.48 1.60 SoCal Citygate 2.53 2.87 Waha Hub 1.15 0.67 AECO 0.68 0.67
SNL U.S. Power Next-Day Prices ($ per megawatt-hour) Hub Current Day Prior Day New England 31.50 32.50 PJM West 29.75 36.00 Ercot North 22.00 26.00 Mid C 40.50 66.25 Palo Verde 34.00 68.00 SP-15 32.75 50.25
(Reporting by Scott DiSavino; Editing by David Holmes )