U.S. natural gas futures eased about 1% on Thursday on forecasts for less demand this week than previously expected and a smaller than projected decline in output.
The price decline came ahead of a federal report expected to show energy firms added near-normal amounts of gas to storage last week after adding more gas into storage than normal during the prior five weeks.
On its first day as the front-month, gas futures for July delivery on the New York Mercantile Exchange fell 2.1 cents, or 0.6%, from where the July contract closed on Wednesday to $3.536 per million British thermal units at 8:52 a.m. EDT (1252 GMT).
Despite the price decline, the front-month was still up about 11% from where the June contract expired when it was still the front-month on Wednesday. The front-month was also on track for its highest close since May 13.
Analysts projected energy firms added 99 billion cubic feet of gas into storage during the week ended May 23. That compares with an increase of 84 bcf during the same week last year and a five-year average build of 98 bcf for this time of year.
Gas stockpiles were around 4% above the five-year (2020-2024) average.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states fell to 105.0 billion cubic feet per day so far in May, down from a monthly record of 105.8 bcfd in April.
On a daily basis, output was on track to drop to a preliminary three-week low of 104.3 bcfd on Thursday, down from 104.7 bcfd on Wednesday. The decline, however, was less than LSEG projected on Wednesday. Analysts have said preliminary data is often revised later in the day.
Energy traders said output reductions this month were primarily due to normal spring maintenance on gas pipes, including U.S. energy firm Kinder Morgan’s 2.7-bcfd Permian Highway from the Permian Basin in West Texas to the Texas Gulf Coast. Kinder Morgan said it exchanged a turbine at the Big Lake compressor station from May 13-26.
Energy firms usually work on gas pipes when demand is low in the spring and autumn.
Meteorologists projected weather across the Lower 48 states would remain mostly warmer than normal through June 13.
LSEG forecast average gas demand in the Lower 48, including exports, will rise from 95.4 bcfd this week to 96.4 bcfd next week. The forecast for this week was lower than LSEG’s outlook on Wednesday, while its forecast for next week was higher.
The average amount of gas flowing to the eight big LNG export plants operating in the U.S. fell to 15.1 bcfd so far in May, down from a monthly record of 16.0 bcfd in April.
The LNG feedgas decline this month was mostly due to maintenance at Cameron LNG’s 2.0-bcfd plant in Louisiana, Cheniere Energy’s 3.9-bcfd Corpus Christi under construction and in operation in Texas and Cheniere’s 4.5-bcfd Sabine Pass in Louisiana, and a few brief reductions at Freeport LNG’s 2.1-bcfd plant in Texas, including most recently on May 28.
Looking ahead, energy traders said they expect LNG feedgas to remain below April’s record high in June with Cheniere planning about three weeks of maintenance on liquefaction trains at Sabine around June 2-23.
Source: Reuters