U.S. natural gas futures edged up about 1% to a two-week high on Thursday as hot weather boosts the amount of gas power generators must burn to keep air conditioners humming.
Front-month gas futures for August delivery on the New York Mercantile Exchange rose 5.1 cents, or 1.4%, to $3.602 per million British thermal units, putting the contract on track for its highest close since June 27 for a third day in a row.
That increase came ahead of the release of a federal storage report on Thursday that is expected to show that near-record production allowed energy firms to add more gas into storage than usual for this time of year despite hotter than normal weather so far this summer.
Analysts forecast energy firms added 46 billion cubic feet (bcf) of gas into storage during the week ended July 11.
That compares with an increase of 18 bcf during the same week last year and an average of 41 bcf over the 2020-2024 period.
If correct, that build would leave gas stockpiles about 6% above the five-year normal for this time of year.
The U.S. National Hurricane Center downgraded the chance that a tropical system off the coast of Louisiana and Mississippi would strengthen into a tropical cyclone over the next week to 30% from 40%.
Analysts say that while tropical storms in the Gulf can knock some gas production out of service, only about 2% of all U.S. gas comes from the federal offshore Gulf of Mexico.
They said storms were more likely to be demand-destroying events that can reduce the amount of gas power generators burn by leaving millions of homes and businesses without electricity and cutting gas exports by shutting Gulf Coast LNG export plants.
Meteorologists forecast the weather in the Lower 48 U.S. states would mostly remain hotter than normal through at least August 1, with the hottest days of the summer expected next week.
Temperatures across the country will average around 81 degrees Fahrenheit (27.2 degrees Celsius) on July 24, topping this summer’s current hottest day of 80 F on June 24 but below falling the daily average record high of 83 F on July 20, 2022, according to data from financial firm LSEG going back to 2018.
SUPPLY AND DEMAND
LSEG said average gas output in the Lower 48 rose to 107.0 billion cubic feet per day so far in July, up from a monthly record high of 106.4 bcfd in June.
LSEG forecast average gas demand in the Lower 48, including exports, would slide from 110.0 bcfd this week to 107.5 bcfd next week.
The average amount of gas flowing to the eight big U.S. LNG export plants rose to 15.8 bcfd so far in July as liquefaction units at some plants slowly exited maintenance reductions and unexpected outages. That was up from 14.3 bcfd in June and 15.0 bcfd in May, but remained below the monthly record high of 16.0 bcfd in April.
On a daily basis, however, feedgas slid to a three-week low of 105.2 bcfd on Wednesday due to the shutdown of Kinder Morgan’s 0.4-bcfd Elba Island in Georgia and the brief shutdown of one of the three liquefaction trains at Freeport LNG’s 2.1-bcfd liquefaction plant in Texas. Energy traders said gas flow data shows the train at Freeport, which shut on Tuesday, was probably back in service.
Source: Reuters