U.S. natural gas futures slid about 2% on Thursday on a big daily increase in output ahead of a federal report expected to show a near-normal storage build last week.
That small price decline came despite forecasts for higher demand and hotter weather than previously expected through mid July and as the amount of gas flowing to liquefied natural gas (LNG) export plants increases after maintenance work.
In Texas, power use set a new record on Tuesday and was expected to break that all-time high on Thursday as a heat wave continues to bake 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, especially in Texas, which 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.
Analysts forecast that U.S. utilities added 82 billion cubic feet (bcf) of gas into storage during the week ended June 23. That compared with an increase of 81 bcf in the same week last year and a five-year (2018-2022) average increase of 80 bcf.
If correct, last week’s increase would boost stockpiles to 2.811 trillion cubic feet (tcf), or 14.9% above the five-year average of 2.447 tcf for the time of year.
On its first day as the front-month, gas futures NGc1 for August delivery on the New York Mercantile Exchange fell 4.8 cents, or 1.8%, from where the August contract closed on Wednesday to $2.620 per million British thermal units at 8:58 a.m. EDT (1258 GMT) on Thursday.
That, however, was up about 1% from where the July contract closed when it was still the front-month on Wednesday.
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.
On a daily basis, output jumped by 1.2 bcfd to 101.4 bcfd on Wednesday. That was the biggest daily increase in output since late April.
Meteorologists forecast that the weather in the Lower 48 states would remain hotter than normal through at least July 14.
With hotter weather coming, Refinitiv forecast that U.S. gas demand, including exports, would rise from 98.0 bcfd this week to 104.2 bcfd next week. Those forecasts were higher than Refinitiv’s outlook on Wednesday.
U.S. exports to Mexico rose to an average of 6.6 bcfd so far in June, up from 6.2 bcfd in May. That compares with a monthly record high of 6.8 bcfd in June 2021.
Gas flows to the seven big U.S. LNG export plants fell to an average of 11.5 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.
On a daily basis, however, total feedgas to the seven LNG export facilities rose to a four-week high of 12.8 bcfd on Wednesday as the amount of gas flowing to Sabine jumped about 2 bcfd over the past week to around 4.2 bcfd. That compares with average feedgas to Sabine of 4.5 bcfd so far this year and 4.5 bcfd in all of 2022.
Source: Reuters (Reporting by Scott DiSavino; Editing by Mark Porter)