U.S. natural gas futures edged up about 1% on Friday as an increase in daily output in recent days offset a decline in gas flows to liquefied natural gas (LNG) export plants.
Gas futures for July delivery on the New York Mercantile Exchange fell 2.5 cents, or 0.7%, to $3.702 per million British thermal units.
For the week, the contract was up about 7% after gaining about 3% last week on expectations that demand for gas will rise later in the month when LNG export plants exit maintenance outages and power generators burn more of the fuel to produce electricity as homes and businesses crank up their air conditioners to escape hot summer weather.
Fast-growing amounts of gas in storage have helped keep prices in check in recent weeks. Gas stockpiles are currently about 5% above normal for this time of year and analysts forecast energy firms would make a record-tying triple-digit injection for a seventh week in a row this week.
The last time energy firms added 100 or more bcf of gas into storage for seven weeks in a row was in June 2014, according to federal energy data going back to 2010.
Another factor keeping pressure on futures prices in recent weeks has been low cash prices. Next-day prices at the U.S. Henry Hub benchmark in Louisiana were trading around $2.86 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.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states has fallen to 104.8 billion cubic feet per day so far in June, down from 105.2 bcfd in May and a monthly record high of 106.3 bcfd in March. The reduction so far this month, however, was smaller than previously projected.
Meteorologists projected weather across the Lower 48 states would remain mostly warmer than normal through June 21.
LSEG forecast average gas demand in the Lower 48, including exports, will rise from 95.4 bcfd this week to 97.7 bcfd next week and 100.4 bcfd in two weeks. The forecasts for this week and next were similar to LSEG’s outlook on Thursday.
The average amount of gas flowing to the eight big U.S. LNG export plants has fallen to 13.8 bcfd so far in June, down from 15.0 bcfd in May and a monthly record high of 16.0 bcfd in April.
Traders said LNG feedgas reductions since April were primarily due to spring maintenance, including work at Cameron LNG’s 2.0-bcfd plant in Louisiana and Cheniere Energy’s 4.5-bcfd Sabine Pass facility in Louisiana and 3.9-bcfd Corpus Christi plant in Texas, and short, unplanned unit outages at Freeport LNG’s 2.1-bcfd plant in Texas on May 6, May 23, May 28 and June 3.
With maintenance reducing flows to Sabine, the nation’s biggest LNG export plant, and as new units enter service at Venture Global LNG’s 3.2-bcfd Plaquemines in Louisiana, the country’s newest plant, the amount of gas expected to flow to each facility was on track to reach around 2.8 bcfd on Friday – a 23-month low for Sabine and an all-time high for Plaquemines.
Energy traders have noted that LNG maintenance would likely continue through early- to mid-June at Cameron and late-June at Sabine.
Source: Reuters