U.S. natural gas futures held steady on Wednesday as a bullish drop in supplies from a lower output in the U.S. and lower exports from Canada offset a bearish decline in demand from liquefied natural gas export (LNG) plants and a delay in late June hot weather forecasts.
In Texas, meanwhile, electricity use is expected to break records this week as homes and businesses crank up air conditioners to escape the summer’s first heat wave, according to the state’s power grid operator.
Front-month gas futures NGc1 for July delivery on the New York Mercantile Exchange remained unchanged at $2.341 per million British thermal units (mmBtu) at 9:10 a.m. EDT (1310 GMT).
Mostly mild weather in recent weeks has kept both heating and cooling demand low, limiting price changes. That lack of price movement cut historic or actual 30-day close-to-close futures volatility to just 60.1%, its lowest since April 2022 for a third day in a row.
On a daily basis, historic volatility hit a record high of 177.7% in February 2022 and a record low of 7.3% in June 1991.
So far this year, historic volatility has averaged 88.9%. That compares with an annual record high of 92.8% in 2022 and a five-year (2018-2022) average of 57.9%.
SUPPLY AND DEMAND
Data provider Refinitiv said average gas output in the U.S. Lower 48 states slid to 102.0 billion cubic feet per day (bcfd) so far in June, down from a monthly record of 102.5 bcfd in May.
On a daily basis, output over the past couple of days was on track to plunge 2.9 bcfd to a preliminary four-month low of 99.5 bcfd on Tuesday. Analysts, however, noted preliminary data is often revised later in the day.
Some of that output decline came from work on Boardwalk Pipeline’s Texas Gas Transmission pipe in Louisiana from June 13-July 11. Refinitiv data showed that gas flows through Texas Gas Transmission’s Lonewa meter in Louisiana fell to zero on June 13 from around 0.5 bcfd during the prior week.
With wildfires still raging in Alberta and other Canadian provinces, Canadian exports to the U.S. were on track to hold at around 7.3 bcfd for a second day in a row on Wednesday. That is down from a recent high of 9.3 bcfd on June 1.
Canadian exports to the U.S. have averaged 7.8 bcfd so far in June, up from 7.4 bcfd during the worst of the wildfires in May but down from an average of 8.3 bcfd since the start of the year and 9.0 bcfd in 2022. About 8% of the gas consumed in, or exported from, the United States comes from Canada.
Meteorologists again pushed back the start of a late June heat wave to June 23 from a previously expected June 21. Last week, meteorologists expected the weather to turn hotter than normal around June 15.
With warmer weather coming, Refinitiv forecast U.S. gas demand, including exports, would rise from 92.9 bcfd this week to 96.2 bcfd next week. Those forecasts, however, were lower than Refinitiv’s outlook on Tuesday due in part to the later expected start of the heat wave in late June.
Gas flows to the seven big U.S. LNG export plants fell to an average of 11.7 bcfd so far in June, down from 13.0 bcfd in May. That is well below the monthly record of 14.0 bcfd in April due to maintenance at several facilities, including Cheniere Energy Inc’s LNG.A Sabine Pass in Louisiana.
On a daily basis, the amount of gas flowing to the LNG plants dropped to 10.9 bcfd on Tuesday, the lowest since December 2022.
Source: Reuters (Reporting by Scott DiSavino; editing by Jonathan Oatis)