U.S. natural gas futures edged up about 1% to a one-week high on Tuesday on a drop in daily output.
Front-month gas futures for October delivery on the New York Mercantile Exchange rose 2.1 cents, or 0.7%, to $3.064 per million British thermal units (mmBtu) at 8:55 a.m. EDT (1255 GMT), putting the contract on track for its highest close since September 9 for a second day in a row.
That price increase came despite forecasts for less demand over the next two weeks than previously expected, ample supplies of gas in storage, and stagnant gas flows to liquefied natural gas (LNG) export plants in recent months.
In the spot market, gas prices at the Waha Hub (NG-WAH-WTX-SNL) in the Permian shale in West Texas gained 100% to $0.004 per mmBtu for Tuesday, up from a 17-week low of -$1.26 for Monday as autumn pipeline maintenance and other constraints trapped gas in the nation’s biggest oil-producing basin.
In the tropics, the U.S. National Hurricane Center said a disturbance in the central Atlantic had a 90% chance of strengthening into a tropical cyclone over the next seven days as it moves northwest across the Atlantic Ocean. The system, however, is not expected to reach land in North America during that time.
Even though storms can boost gas prices by cutting output along the U.S. Gulf Coast, they are more likely to reduce prices by shutting LNG export plants and knocking out power to homes and businesses. About 40% of the power generated in the U.S. comes from gas-fired plants.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 states fell to 107.4 billion cubic feet per day so far in September, down from a record monthly high of 108.3 bcfd in August.
On a daily basis, output was on track to drop to a preliminary three-month low of 105.1 bcfd on Tuesday due mostly to pipeline maintenance and other declines in Texas, West Virginia and Pennsylvania. Preliminary data, however, is often revised later in the day.
Record output earlier this year allowed energy companies to inject more gas into storage than usual so far this summer. There was about 6% more gas in storage than normal for this time of year, and analysts expect that percentage to mostly grow in coming weeks.
Meteorologists forecast the weather will remain warmer than normal through at least October 1.
That late season heat, however, will not necessarily increase gas demand by much since it is more likely to reduce the usual increase in heating demand seen at this time of year rather than boost the amount of gas power generators burn to keep air conditioners humming.
LSEG projected average gas demand in the Lower 48 states, including exports, would rise from 101.9 bcfd this week to 102.5 bcfd next week. Those forecasts were lower than LSEG’s outlook on Monday.
The average amount of gas flowing to the eight big U.S. LNG export plants slid to 15.6 bcfd so far in September, down from 15.8 bcfd in August. That compares with a monthly record high of 16.0 bcfd in April.
In other LNG news, Berkshire Hathaway Energy’s 0.8-bcfd Cove Point plant in Maryland is scheduled to shut soon for about a month of planned annual autumn maintenance.
Gas flows to Cove Point were on track to slide to 0.6 bcfd on Tuesday, down from 0.7 bcfd over the prior 15 days, according to LSEG data.
Source: Reuters