U.S. natural gas futures dropped by about 6% to a two-week low on Thursday on a bigger-than-expected weekly storage build and forecasts for less hot weather over the next two weeks than previously expected.
That less hot weather should reduce the amount of gas electric power generators burn to keep air conditioners humming.
The U.S. Energy Information Administration (EIA) said utilities added 35 billion cubic feet (bcf) of gas into storage during the week ended Aug. 16.
That was more than the 29-bcf build analysts forecast in a Reuters poll and compares with an increase of 23 bcf in the same week last year and a five-year (2019-2023) average rise of 41 bcf for this time of year.
Even though the storage build was less than expected, it was still smaller than normal for a 13th time in the past 14 weeks, including the rare summer withdrawal during the week ended Aug. 9. That withdrawal was the first weekly decline in August since 2006.
With the latest build, gas stocks were still about 13% above normal for this time of year.
Front-month gas futures for September delivery on the New York Mercantile Exchange fell 11.9 cents, or 5.5%, to $2.058 per million British thermal units at 10:39 a.m. EDT (1439 GMT), putting the contract on track for its lowest close since Aug. 6.
In the spot market, pipeline constraints caused next-day gas prices at the Waha hub in the Permian Shale in West Texas to average in negative territory again for a record 28th time this year.
Waha prices first averaged below zero in 2019. It happened 17 times in 2019, six in 2020 and once in 2023.
SUPPLY AND DEMAND
Producers increase and decrease output in reaction to prices, but it usually takes a few months for changes in drilling activity to show up in the production data.
Average monthly spot prices at the U.S. Henry Hub benchmark in Louisiana hit a 12-month high of $3.18 per mmBtu in January before dropping to a 44-month low of $1.72 in February and a 32-year low of $1.49 in March, according to Reuters and federal energy data.
In reaction to that price plunge, producers cut average monthly output from 106.0 billion cubic feet per day (bcfd) in February to 102.7 bcfd in March, 101.5 bcfd in April and a 17-month low of 101.3 bcfd in May, according to federal energy data.
Winter storms at the start of the year caused output to fall from a record 106.3 bcfd in December to 103.6 bcfd in January.
As monthly spot Henry Hub prices increased to $1.60 per mmBtu in April, $2.12 in May and $2.54 in June, some producers, including EQT and Chesapeake Energy, started to increase drilling activities, boosting output to 101.0 bcfd in June and 103.4 bcfd in July.
But with average spot Henry Hub prices back down to $2.08 per mmBtu in July and $2.02 so far in August, analysts said output would likely decline as some producers reduce drilling activities again.
Financial firm LSEG said gas output in the U.S. Lower 48 U.S. states has slid to an average of 102.3 bcfd so far in August, down from 103.4 bcfd in July.
LSEG forecast average gas demand in the Lower 48, including exports, will rise from 103.7 bcfd this week to 103.9 bcfd next week. Those forecasts were lower than LSEG’s outlook on Wednesday.
Gas flows to the seven big U.S. LNG export plants rose to 12.9 bcfd so far in August, up from 11.9 bcfd in July. That compares with a monthly record high of 14.7 bcfd in December 2023.
Week ended Week ended Year ago Five-year
Aug 16 Aug 9 Aug 16 average
Actual Actual Aug 16 U.S. weekly natgas storage change (bcf): +35 -6 +23 +41 U.S. total natgas in storage (bcf): 3,299 3,264 3,078 2,930 U.S. total storage versus 5-year average 12.6% 13.0%
Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five-Year
Last Year Average Average
2023 (2018-2022) Henry Hub 2.16 2.18 2.65 2.66 3.60 Title Transfer Facility (TTF) 12.04 12.14 11.21 13.04 14.39 Japan Korea Marker (JKM) 13.79 13.94 12.43 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 5 5 3 6 10 U.S. GFS CDDs 191 198 211 186 165 U.S. GFS TDDs 196 203 214 192 175
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 101.9 101.8 101.9 103.6 96.3 U.S. Imports from Canada 7.7 7.7 7.8 N/A 7.3 U.S. LNG Imports 0.0 0.0 0.0 0.0 0.1 Total U.S. Supply 109.5 109.5 109.7 N/A 103.7
U.S. Demand (bcfd) U.S. Exports to Canada 1.6 1.7 1.7 N/A 2.3 U.S. Exports to Mexico 7.3 7.0 7.2 N/A 6.1 U.S. LNG Exports 12.7 13.0 13.0 11.8 7.7 U.S. Commercial 4.5 4.5 4.5 4.5 4.5 U.S. Residential 3.7 3.7 3.7 3.6 3.4 U.S. Power Plant 43.8 44.6 44.5 45.3 43.0 U.S. Industrial 21.8 21.9 21.9 21.5 21.7 U.S. Plant Fuel 5.0 5.0 5.0 5.1 5.1 U.S. Pipe Distribution 2.2 2.2 2.2 2.2 2.2 U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1 Total U.S. Consumption 81.2 82.0 82.0 82.3 80.0 Total U.S. Demand 102.8 103.7 103.9 N/A 96.1
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 75 74 83 107 81 Jan-Jul 76 76 77 102 79 Oct-Sep 78 77 76 103 81
U.S. weekly power generation percent by fuel – EIA
Week ended Week ended 2023 2022 2021
Aug 23 Aug 16 Wind 8 8 10 11 10 Solar 6 6 4 3 3 Hydro 5 6 6 6 7 Other 1 1 2 2 2 Petroleum 0 0 0 0 0 Natural Gas 46 45 41 38 37 Coal 17 17 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 2.14 2.18 Transco Z6 New York 1.43 1.43 PG&E Citygate 2.34 2.58 Eastern Gas (old Dominion South) 1.38 1.42 Chicago Citygate 1.62 1.71 Algonquin Citygate 1.55 1.61 SoCal Citygate 1.67 1.86 Waha Hub -0.41 0.13 AECO 0.34 0.35
SNL U.S. Power Next-Day Prices ($ per megawatt-hour) Hub Current Day Prior Day New England 29.00 30.75 PJM West 22.75 21.50 Ercot North 31.50 39.75 Mid C 42.00 41.25 Palo Verde 31.00 35.50 SP-15 30.50 36.25
(Reporting by Scott DiSavino; editing by Jonathan Oatis)