U.S. natural gas futures slid about 2% to a one-week low on Monday on an increase in output so far this month and forecasts for less demand this week than previously expected.
That should allow utilities to keep adding more gas to storage than usual for this time of year despite hotter-than-normal weather so far this summer.
Front-month gas futures for August delivery on the New York Mercantile Exchange (NYMEX) fell 6.0 cents, or 1.8%, to $3.349 per million British thermal units (mmBtu) at 9:07 a.m. EDT (1307 GMT), putting the contract on track for its lowest close since June 26 for a second day in a row.
Total gas futures volume traded on the NYMEX (NG-TOT) on July 2 was just 315,668 contracts, the lowest since April 2024.
One factor weighing on futures prices over the past few months has been low cash prices. Next-day gas prices at the U.S. Henry Hub benchmark (NG-W-HH-SNL) in Louisiana were trading around $3.24 per mmBtu, keeping spot contracts below front-month futures every day since late April.
Analysts have said that so long as spot prices remain far enough below front-month futures to cover margin and storage costs, traders should be able to lock in arbitrage profits by buying spot gas, storing it and selling a futures contract.
Another factor weighing on futures prices in recent months has been the growing surplus of gas in storage over the five-year normal for this time of year. Analysts projected energy firms added more gas into storage than usual for an 11th time in 12 weeks during the week ended July 4.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states rose to 107.0 billion cubic feet per day (bcfd) so far in July, up from a monthly record of 106.4 bcfd in June.
Meteorologists forecast weather across the Lower 48 states will remain mostly warmer than normal through at least July 22.
With hotter weather expected, LSEG forecast average gas demand in the Lower 48, including exports, would rise from 105.9 bcfd this week to 107.5 bcfd next week. The forecast for this week was lower than LSEG’s outlook on Thursday before the long U.S. July 4 holiday weekend.
The average amount of gas flowing to the eight big U.S. LNG export plants rose to 15.5 bcfd so far in July as liquefaction units at some plants slowly exit 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.
The U.S. became the world’s biggest LNG supplier in 2023, surpassing Australia and Qatar, as surging global prices fed demand for more exports, due in part to supply disruptions and sanctions linked to Russia’s 2022 invasion of Ukraine.
Gas was trading around $12 per mmBtu at the Dutch Title Transfer Facility (TTF) (TRNLTTFMc1) benchmark in Europe and $13 at the Japan Korea Marker (JMM) (JKMc1) benchmark in Asia.
Source: Reuters