U.S. natural gas futures held near a two-week low on Thursday as the market waited for direction from a federal report expected to show a smaller-than-usual storage build last week when power generators burned lots of gas to keep air conditioners humming during a lingering heat wave.
Analysts forecast U.S. utilities added 43 billion cubic feet (bcf) of gas into storage during the week ended Sept. 1. That compares with an increase of 55 bcf in the same week last year and a five-year (2018-2022) average increase of 60 bcf.
If correct, last week’s increase would boost stockpiles to 3.158 trillion cubic feet (tcf), or 7.9% above the five-year average of 2.926 tcf for the time of year.
Prices did not react even though the weather will remain hot for at least a couple more weeks, especially in Texas, keeping power generator gas demand high.
Front-month gas futures NGc1 for October delivery on the New York Mercantile Exchange rose 0.7 cents, or 0.3%, to $2.517 per million British thermal units (mmBtu) at 9:24 a.m. EDT (1324 GMT). On Wednesday, the contract closed at its lowest since Aug. 23.
In Texas, demand for power continued to break monthly records for September this week as homes and businesses kept their air conditioners cranked up to escape a heat wave that has lingered over the state for most of the summer.
The state’s power grid operator, the Electric Reliability Council of Texas (ERCOT), urged consumers to conserve power Wednesday evening and issued an emergency alert to maintain stability of the grid. There were no power outages related to ERCOT’s actions.
“High demand, lower wind generation, and the declining solar generation during sunset led to lower operating reserves on the grid and eventually contributed to lower frequency, which precipitated the emergency … declaration,” ERCOT’s CEO Pablo Vegas said in a statement.
ERCOT forecast the power situation would be tight again Thursday evening with supplies expected to exceed demand by less than 1,000 megawatts (MW) after the sun goes down and solar power stops working at around 8 p.m. local time.
ERCOT said it expects to set a new September peak demand record every weekday this week, but also expects those peaks to remain below its all-time high of 85,435 megawatts on Aug. 10.
Extreme heat requires utilities to burn more gas to power cooling, especially in Texas. In 2022, about 49% of the state’s power came from gas-fired plants, with most of the rest coming from wind (22%), coal (16%), nuclear (8%) and solar (4%), federal energy data showed.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the lower 48 U.S. states slid to 101.9 billion cubic feet per day (bcfd) so far in September, down from 102.2 bcfd in August and a record 102.3 bcfd in May.
On a daily basis, however, output was on track to drop about 2.8 bcfd over the past few days to a preliminary 11-week low of 100.2 bcfd on Thursday. Energy traders, however, noted preliminary data is often revised later in the day.
Even though the weather is turning seasonally cooler, meteorologists forecast temperatures will remain mostly higher than normal through at least Sept. 22.
LSEG forecast U.S. gas demand, including exports, will ease with that seasonal cooling from around 101.3 bcfd this week to 100.8 bcfd next week. The forecast for next week was lower than LSEG’s outlook on Wednesday.
Gas flows to the seven big U.S. LNG export plants rose to an average of 13.0 bcfd so far in September from 12.3 bcfd in August. That compares with a monthly record of 14.0 bcfd in April.
Source: Reuters (Reporting by Scott DiSavino, Editing by Helen Popper)