U.S. natgas futures fall to two-week low as heat wave expected to break
U.S. natural gas futures fell to a fresh two-week low on Friday on forecasts for demand to slide over the next two weeks as the weather moderates after a heat wave baked much of the country this week.
That demand decline comes because power generators will not need to burn as much gas to keep air conditioners humming even though more gas is expected to flow to the nation's liquefied natural gas (LNG) terminals for export.
"Power burn has posted several new records this week as the hottest temperatures of the summer are set to hit many areas this weekend," Daniel Myers, market analyst at Gelber & Associates in Houston, said in a report.
He noted that prices, however, "are shrugging their shoulders heading into the weekend as demand is expected to dissipate next week as quickly as it has come."
Meteorologists forecast this week's hot weather will peak over the weekend with high temperatures expected to reach 100 degrees Fahrenheit (38 Celsius) in New York City on Saturday and Sunday, before declining to near normal levels over the next two weeks.
Front-month gas futures for August delivery on the New York Mercantile Exchange fell 3.6 cents, or 1.6%, to settle at $2.251 per million British thermal units, their lowest since July 2 for a second day in a row.
That put the contract down for a fifth day in a row for the first time since April.
For the week, the contract fell 8%, its first weekly decline in four weeks.
As the weather moderates, data provider Refinitiv projected demand in the lower 48 U.S. states would slide from 91.3 billion cubic feet per day (bcfd) this week to 90.2 bcfd next week and 89.7 bcfd in two weeks because power plants will not need to burn as much gas to meet air conditioning use.
That is in line with Refinitiv's demand forecasts on Thursday and keeps power generators on track to burn more than 40 bcfd of gas on average this month, which would break the sector's 39.9 bcfd monthly record set in July 2018, according to federal energy projections.
Since Tropical Storm Barry hit the central Louisiana coast on Saturday, energy firms have been returning Gulf of Mexico wells and platforms to service.
Gas production from the offshore Gulf of Mexico was expected to rise to 2.1 bcfd on Friday from a low of 1.2 bcfd on Saturday-Monday, according to Refinitiv. That compares with a high of 3.1 bcfd during the first week of July.
With the gains in the Gulf, output in the Lower 48 states edged up to 88.5 bcfd on Thursday from an eight-week low of 87.6 bcfd on Tuesday, according to Refinitiv. That compares with an all-time daily high of 91.1 bcfd on July 5 and an average of 82.1 bcfd during this week last year.
The amount of gas flowing to the nation's liquefied natural gas (LNG) export terminals, meanwhile, was expected to rise to an all-time high 6.5 bcfd on Friday and continue breaking that record over the next two weeks as new units at several facilities enter service, including Freeport LNG's Freeport in Texas and Kinder Morgan Inc's Elba in Georgia.
Analysts said utilities likely added a near normal 46 billion cubic feet (bcf) of gas into storage during the week ended July 19. That compares with an increase of 27 bcf during the same week last year and a five-year (2014-18) average build of 44 bcf for the period.
If correct, the increase would boost stockpiles to 2.579 trillion cubic feet (tcf), 5.2% below the five-year average of 2.720 tcf for this time of year.
The amount of gas in inventory has remained below the five-year average since September 2017. It fell as low as 33% below that average in March 2019. With production near record highs, analysts expect stockpiles will reach a near-normal 3.7 tcf by the end of the summer injection season on Oct. 31.
Week ended Week ended Year ago Five-year
July 19 Jul 12 July 19 average
(Forecast) (Actual) July 19 U.S. natgas storage (bcf): +46 +62 +27 +44
Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days Two-Week Total Forecast Current Prior Day Prior 10-Year 30-Year
Day Year Norm Norm U.S. GFS HDDs 1 1 3 3 2 U.S. GFS CDDs 223 229 216 202 202 U.S. GFS TDDs 234 230 219 205 204
Refinitiv U.S. Weekly GFS Supply and Demand Forecasts
Prior Week Current Next Week This week Five-Yea
Week last year r
Average
For
Month U.S. Supply (bcfd)
U.S. Lower 48 Dry Production 89.9 88.1 89.4 82.1 73.9 U.S. Imports from Canada 7.5 7.5 7.7 8.8 8.0 U.S. LNG Imports 0.0 0.0 0.0 0.2 0.2 Total U.S. Supply 97.5 95.6 97.1 91.1 82.1
U.S. Demand (bcfd) U.S. Exports to Canada 2.5 2.5 2.5 2.6 1.8 U.S. Exports to Mexico 4.9 4.9 4.9 4.7 3.6 U.S. LNG Exports 5.9 5.9 6.6 3.3 1.1 U.S. Commercial 4.4 4.4 4.4 4.4 4.4 U.S. Residential 3.7 3.7 3.6 3.6 3.5 U.S. Power Plant 40.1 41.7 40.0 40.5 34.5 U.S. Industrial 21.4 21.5 21.5 21.3 20.0 U.S. Plant Fuel 4.4 4.4 4.4 4.4 4.4 U.S. Pipe Distribution 2.0 2.1 2.0 2.0 2.0 U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1 Total U.S. Consumption 76.2 77.9 76.1 76.3 68.9 Total U.S. Demand 89.5 91.3 90.2 86.9 75.4
SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu) Hub Current Prior Day
Day Henry Hub 2.38 2.44 Transco Z6 New York 2.44 2.41 PG&E Citygate 2.67 2.69 Dominion South 2.12 2.14 Chicago Citygate 2.23 2.25 Algonquin Citygate 2.61 2.36 SoCal Citygate 2.58 2.66 Waha Hub 0.71 0.75
SNL U.S. Power Next-Day Prices ($ per megawatt-hour) Hub Current Prior Day
Day New England 38.00 32.00 PJM West 41.75 39.40 Ercot North 26.00 28.00 Mid C 30.41 24.00 Palo Verde 33.81 37.39 SP-15 30.50 30.25
(Reporting by Scott DiSavino Editing by Chizu Nomiyama)