U.S. natural gas futures eased about 1% to a 10-week low on Wednesday on forecasts for less hot weather over the next two weeks than previously expected and a drop in feedgas to liquefied natural gas (LNG) export plants due primarily to the shutdown of Freeport LNG in Texas for Hurricane Beryl.

Energy traders noted prices were also weighed down by the persistent oversupply of gas still in storage versus normal for this time of year. Analysts said there was currently about 18% more gas in storage than is normal.

That price decline was limited by forecasts for more demand this week than previously expected and a drop in output over the past few days.

Front-month gas futures NGc1 for August delivery on the New York Mercantile Exchange fell 3.1 cents, or 1.4%, to $2.157 per million British thermal units (MMBtu) at 9:07 a.m. EDT (1307 GMT), putting the contract on track for its lowest close since May 3.

That kept the front-month in technically oversold territory for a third day in a row and the ninth time in the past 11 trading days.

In other news, the U.S. Energy Information Administration (EIA) revised peak hourly power demand on Monday down to 739,849 megawatts (MW), which would not break the prior all time high of 742,600 MW set on July 20, 2022, and would only be the highest since usage peaked at 741,815 MW on July 27, 2023.

SUPPLY AND DEMAND

Financial firm LSEG said gas output in the Lower 48 U.S. states rose to an average of 102.1 bcfd so far in July, up from an average of 100.2 bcfd in June and a 17-month low of 99.5 bcfd in May. U.S. output hit a monthly record high of 105.5 bcfd in December 2023.

On a daily basis, however, output was on track to drop by 3.5 bcfd over the past three days to a preliminary five-week low of 99.5 bcfd on Wednesday. Preliminary data is often revised later in the day.

Several producers cut output earlier in the year after futures prices dropped to 3-1/2-year lows in February and March. But higher prices in April, May and June prompted some drillers, including EQT EQT.N and Chesapeake Energy CHK.O, to return to the well pad.

Meteorologists projected weather across the Lower 48 states would remain mostly near normal through July 24 before turning hotter than normal through at least Aug. 1.

That heat will likely force power generators to continue burning lots of gas to produce electricity to keep air conditioners humming. Power generators burned a daily record of 54.1 bcfd of gas on July 9, according to LSEG data.

But with less hot weather coming, LSEG forecast average gas demand in the Lower 48, including exports, will slide from 105.5 bcfd this week to 103.5 bcfd next week. The forecast for this week was higher than LSEG’s outlook on Tuesday.

Gas flows to the seven big U.S. LNG export plants fell to 11.6 bcfd so far in July due mostly to the shutdown of Freeport LNG in Texas for Hurricane Beryl, down from 12.8 bcfd in June and a monthly record high of 14.7 bcfd in December 2023.

On a daily basis, LNG feedgas was on track to drop to a 12-week low of 10.7 bcfd on Wednesday due to the ongoing reduction at Freeport and a new reduction over the past couple of days at Cheniere Energy’s LNG.N Corpus Christi in Texas, according to LSEG data.
Source: Reuters (Reporting by Scott DiSavino, Editing by Franklin Paul)