U.S. natural gas futures were little changed on Friday as rising output over the past month and the tremendous oversupply of gas in storage offset forecasts for hot weather to return in late July and early August that should boost the amount of gas power generators burn to produce electricity to keep air conditioners humming.
Analysts said there was still about17% more gas in storage than normal for this time of year even after injections have been smaller than usual for nine of the past 10 weeks because several producers cut output earlier in the year after futures prices dropped to 3-1/2 year lows in February and March.
Higher prices in April and May, however, prompted some drillers, including EQT and Chesapeake Energy, to return to the well pad. But with prices down about 18% so far in July, the market is watching to see if drillers start reducing the amount of gas they pull out of the ground.
Front-month gas futures NGc1 for August delivery on the New York Mercantile Exchange rose 0.3 cents, or 0.1%, to settle at $2.128 per million British thermal units (mmBtu).
For the week, the contract fell about 9% after rising less than 1% last week. That put the front-month down for the fifth time in six weeks, falling about 27% during that time.
The market is sending mixed messages about the upcoming November-March heating season. The premium of futures for March is trading at a record low to April NGH25-J25, which is a sign that traders are already giving up on the upcoming winter. But futures for November are trading at a record high premium over October NGV24-X24, which is a sign that traders are expecting higher prices this winter.
March is the last month of winter storage withdrawal season and April is the first month of the summer injection season. October is the last month of the summer season and November is the first month of the winter season. Since gas demand peaks during the winter heating season, traders say prices in the summer should not exceed the winter.
In other news, a worldwide tech outage crippled industries from travel to finance before services started coming back online after hours of disruption, highlighting the risks of a global shift towards digital, interconnected technologies.
SUPPLY AND DEMAND
Financial firm LSEG said gas output in the Lower 48 U.S. states rose to an average of 102.1 bcfd so far in July, up from an average of 100.2 bcfd in June and a 17-month low of 99.4 bcfd in May. U.S. output hit a monthly record high of 105.5 bcfd in December 2023.
Meteorologists projected weather across the Lower 48 states would remain mostly near normal through July 25 before turning hotter than normal through at least Aug. 3.
With milder weather coming, LSEG forecast average gas demand in the Lower 48, including exports, will slide from 105.9 bcfd this week to 104.2 bcfd to 103.6 bcfd next week before rising to 106.6 bcfd in two weeks when the heat returns. The forecasts for this week and next were higher than LSEG’s outlook on Thursday.
Gas flows to the seven big U.S. LNG export plants fell to 11.6 bcfd so far in July after Freeport LNG in Texas shut before Hurricane Beryl hit the Texas Coast on July 8, down from 12.8 bcfd in June and a monthly record high of 14.7 bcfd in December 2023.
Freeport started pulling in small amounts of feedgas this week as it slowly returns to service. The 2.1-bcfd plant was on track to pull in about 0.8 bcfd of gas on Friday, up from 0.5 bcfd on Thursday after pulling in almost no gas from July 7-15.
Source: Reuters (Reporting by Scott DiSavino;Editing by Elaine Hardcastle and Diane Craft)