U.S. natural gas futures gained about 2% on Thursday on a slightly smaller-than-expected weekly storage build and forecasts for lower output and hotter weather over the next two weeks than previously expected, especially in Texas.
That price increase came despite a decline in the amount of gas flowing to U.S. liquefied natural gas (LNG) export plants.
The U.S. Energy Information Administration (EIA) said utilities added 14 billion cubic feet (bcf) of gas into storage during the week ended July 28.
That was slightly smaller than the 17-bcf build analysts forecast in a Reuters poll and compares with an increase of 37 bcf in the same week last year and a five-year (2018-2022) average increase of 37 bcf.
Analysts said the build was much smaller than usual because power generators burned record amounts of gas for three days in a row last week to keep air conditioners humming during an extreme heat wave blanketing much of the country.
Power demand in Texas hit an all-time high on Monday and Tuesday and will likely break that record again on Thursday, Friday and early next week as homes and businesses keep their air conditioners cranked up during the lingering heat wave, 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 coming from wind (22%), coal (16%), nuclear (8%) and solar (4%), federal energy data showed.
Front-month gas futures for September delivery on the New York Mercantile Exchange rose 5.8 cents, or 2.3%, to $2.535 per million British thermal units (mmBtu) at 10:36 a.m. EDT (1436 GMT).
One factor that has weighed on gas futures in recent months – futures are down about 44% so far this year – has been persistently lower spot prices. Next-day gas at the Henry Hub benchmark in Louisiana fell about 2.5% to $2.43 per mmBtu for Thursday. Futures have traded over spot gas every day except one since the end of April.
SUPPLY AND DEMAND
Data provider Refinitiv said average gas output in the U.S. Lower 48 states slid to 101.6 billion cubic feet per day (bcfd) so far in August, down from 101.8 bcfd in June. That compares with a monthly record of 102.2 bcfd in May.
Meteorologists forecast the weather in the Lower 48 states will remain hotter than normal through at least Aug. 18.
With pipeline and LNG exports expected to increase, Refinitiv forecast U.S. gas demand, including exports, would rise from 104.7 bcfd this week to 105.2 bcfd next week. Those forecasts were similar to Refinitiv’s outlook on Wednesday.
Gas flows to the seven big U.S. LNG export plants fell from an average of 12.7 bcfd in July to 12.1 bcfd so far in August due mostly to a reduction at Cheniere Energy’s Sabine Pass in Louisiana. That compares with a monthly record of 14.0 bcfd in April.
(Reporting by Scott DiSavino; Editing by Alexander Smith and Jonathan Oatis)