U.S. natural gas futures fell about 5% to a 14-week low on Monday on near-record output, a decline in demand over the next two weeks, and lagging gas flows to liquefied natural gas (LNG) export plants.

Front-month gas futures for September delivery on the New York Mercantile Exchange fell 14.4 cents, or 4.7%, to settle at $2.939 per million British thermal units, their lowest close since April 25.

That drop pushed the contract back into technically oversold territory for the second time in a week.

Even though the hottest days of the summer were likely last week, meteorologists forecast temperatures in the Lower 48 U.S. states will remain mostly hotter than normal through at least August 19.

Despite a hotter-than-usual summer, record output has enabled energy firms to keep adding more gas than usual into storage. Analysts said gas stockpiles were currently around 7% above normal for this time of year and would likely keep growing in coming weeks.

SUPPLY AND DEMAND

LSEG said average gas output in the Lower 48 states rose to 107.9 billion cubic feet per day so far in August, up from a monthly record high of 107.6 bcfd in July.

On a daily basis, however, output is on track to drop to a preliminary one-week low of 107.1 bcfd on Monday, down about 2.3 bcfd since hitting a daily record high of 109.4 bcfd on July 28. Preliminary data is often revised later in the day.

LSEG projected average gas demand in the Lower 48 states, including exports, would rise from 105.8 bcfd this week to 110.5 bcfd next week. Those forecasts were lower than LSEG’s outlook on Friday.

The average amount of gas flowing to the eight big U.S. LNG export plants rose to 15.8 bcfd so far in August, up from 15.5 bcfd in July but still below the monthly record high of 16.0 bcfd in April.

That small increase in LNG export feedgas came despite problems at Freeport LNG’s export plant in Texas last week.
Source: Reuters