U.S. natural gas futures held near a two-week low on Friday as lower flows to liquefied natural gas export plants offset forecasts for warmer-than-normal weather that should support some late-summer air conditioning demand in coming weeks.
Front-month gas futures for October delivery on the New York Mercantile Exchange rose 0.2 cents, or 0.1%, to $2.936 per million British thermal units. On Thursday, the contract closed at its lowest level since August 27.
That put the contract down about 4% this week, its first loss in three weeks after gaining about 13% during the prior two weeks.
In the spot gas market, prices at the Waha Hub (NG-WAH-WTX-SNL) in the Permian shale in West Texas held around 7 cents per mmBtu for a second day in a row, their lowest since late May when the hub traded in negative territory.
Traders noted the Waha price drop was a sign that pipeline constraints, such as maintenance on Kinder Morgan’s Gulf Coast Express in Texas, were trapping gas in the Permian Basin.
In the tropics, the U.S. National Hurricane Center said a disturbance off the west coast of Africa had a 40% chance of strengthening into a tropical cyclone over the next seven days as it moves west across the Atlantic Ocean. The system is not expected to reach land in North America during that time.
Even though storms can boost gas prices by cutting output along the U.S. Gulf Coast, they are more likely to reduce prices by shutting LNG export plants and knocking out power to homes and businesses. About 40% of the power generated in the U.S. comes from gas-fired plants.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 states fell to 107.4 billion cubic feet per day so far in September, down from a record monthly high of 108.3 bcfd in August.
Record output so far this year has allowed energy companies to inject more gas into storage than usual this summer. There was about 6% more gas in storage than normal for this time of year, and analysts said they expect that percentage to grow in coming weeks.
Meteorologists forecast the weather will remain warmer than normal through at least September 27. That heat should boost the amount of gas power generators burn to keep air conditioners humming.
LSEG projected average gas demand in the Lower 48 states, including exports, would rise from 101.0 bcfd this week to 102.6 bcfd next week and 102.9 bcfd in two weeks. The forecast for next week was lower than LSEG’s outlook on Thursday.
The average amount of gas flowing to the eight big U.S. LNG export plants slid to 15.5 bcfd so far in September, down from 15.8 bcfd in August. That compares with a monthly record high of 16.0 bcfd in April.
On a daily basis, LNG export feedgas was on track to fall to a three-week low of 15.0 bcfd on Friday due to recent decreases at several plants, including Cheniere Energy’s 3.9-bcfd Corpus Christi facility in Texas and 4.5-bcfd Sabine in Louisiana, Venture Global LNG’s 1.6-bcfd Calcasieu in Louisiana and Freeport LNG’s 2.1-bcfd plant in Texas.
That figure compares with a daily LNG feedgas record of 17.3 bcfd on April 9.
In other LNG news, Berkshire Hathaway Energy’s 0.8-bcfd Cove Point plant in Maryland is scheduled to shut around September 15 for about a month of planned annual autumn maintenance.
Source: Reuters