U.S. natural gas futures slid about 2% on Wednesday on technical selling and as the amount of gas flowing to liquefied natural gas export (LNG) remains low due to maintenance outages at several facilities.
That price decline came despite a drop in output in recent weeks and forecasts for the weather to remain hotter-than-normal through mid-July, especially in Texas.
Power demand in Texas set a new record peak on Tuesday and was expected to break that all-time high on Wednesday as a heat wave bakes the state, according to preliminary data from the state’s grid operator, the Electric Reliability Council of Texas (ERCOT).
Extreme heat boosts the amount of gas generators burn to produce power for air conditioning, since Texas 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 from wind (22%), coal (16%), nuclear (8%) and solar (4%), according to federal energy data.
On its last day as the front-month, gas futures NGc1 for July delivery on the New York Mercantile Exchange fell 6.6 cents, or 2.4%, to $2.697 per million British thermal units (mmBtu) at 9:37 a.m. EDT (1337 GMT).
That price decline pushed the contract out of technically overbought territory for the first time in four days.
August NGQ23 futures, which will soon be the front-month, were down about 4cents to $2.75 per mmBtu.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states fell to 101.5 billion cubic feet per day (bcfd) so far in June from a record 102.5 bcfd in May.
Meteorologists forecast that weather in the Lower 48 states would remain hotter than normal June 28-July 13.
With hotter weather coming, Refinitiv forecast that U.S. gas demand, including exports, would rise from 97.2 bcfd this week to 102.7 bcfd next week. The forecast for next week was higher than Refinitiv’s outlook on Tuesday.
U.S. exports to Mexico rose to an average of 6.4 bcfd so far in June from 6.0 bcfd in May. That compares with a monthly record high of 6.5 bcfd in June 2021.
Gas flows to the seven big U.S. LNG export plants fell to an average of 11.4 bcfd so far in June from 13.0 bcfd in May. That is well below the monthly record high of 14.0 bcfd in April due to maintenance at several facilities, including Cheniere Energy Inc’s LNG.A Sabine Pass in Louisiana and Corpus Christi in Texas.
The record flows in April exceeded the 13.8 bcfd of gas the seven big plants can turn into LNG since the facilities also use some of the fuel to power equipment used to produce LNG.
Source: Reuters (Reporting by Scott DiSavino, Editing by Nick Zieminski)