U.S. natural gas futures fell about 2% on Thursday on a bigger-than-expected weekly storage build and forecasts for lower demand next week as the amount of gas flowing to liquefied natural gas (LNG) facilities remains low due to maintenance work at several of the export plants.
The U.S. Energy Information Administration (EIA) utilities added 95 billion cubic feet (bcf) of gas into storage during the week ended June 16.
That was higher than the 91-bcf build analysts forecast in a Reuters poll and compared with an increase of 76 bcf in the same week last year and a five-year (2018-2022) average increase of 86 bcf.
Analysts said the build was bigger than usual for this time of year due to mild weather last week that reduced the amount of gas power generators burned to meet air conditioning demand.
Last week’s increase boosted stockpiles to 2.729 trillion cubic feet (tcf), or 15.3% above the five-year average of 2.367 tcf for the time of year.
In Texas, meanwhile, the Electric Reliability Council of Texas (ERCOT), the state’s power grid operator, again projected electric use would break records – this time Sunday-Tuesday, June 25-27.
Those demand projections came after actual usage in Texas so far this week fell short of ERCOT’s record-breaking forecasts as consumers heeded calls to conserve energy during the first heat wave of the summer.
Energy traders noted it would be very unusual for any power grid to break a peak demand record on a Sunday when many businesses are shut for the weekend. No matter whether ERCOT breaks the all-time high this weekend or later next week, traders noted high air conditioning demand will boost the amount of gas generators burn since Texas gets about half of its electricity from gas.
In 2022, about 49% of the state’s power came from gas-fired plants, with most of the rest from wind (22%), coal (16%), nuclear (8%) and solar (4%), according to federal energy data.
In addition to extreme heat this week, utilities in Texas were also dealing with over 200,000 homes and businesses without power after storms over the past day or so.
Front-month gas futures NGc1 for July delivery on the New York Mercantile Exchange fell 5.9 cents, or 2.3%, to $2.538 per million British thermal units at 10:45 a.m. EDT (1445 GMT).
Before EIA released the storage data, gas prices were trading up about 0.6%.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states fell from a record 102.5 billion cubic feet per day (bcfd) in May to 101.5 bcfd so far in June due in part to ongoing pipeline maintenance in the Haynesville shale in Arkansas, Louisiana and Texas, and other basins.
Meteorologists forecast the weather in the Lower 48 states would turn from near-normal now to hotter than normal from June 24-July 7.
With hot weather coming, Refinitiv forecast U.S. gas demand, including exports, would rise from 94.7 bcfd this week to 98.2 bcfd next week. The forecast for this week was higher than Refinitiv’s outlook on Wednesday, while its forecast for next week was lower.
Gas flows to the seven big U.S. LNG export plants fell to an average of 11.4 bcfd so far in June from 13.0 bcfd in May. That is well below the monthly record high of 14.0 bcfd in April due to maintenance at several facilities, including Cheniere Energy Inc’s LNG.A Sabine Pass in Louisiana and Freeport LNG in Texas.
Source: Reuters (Reporting by Scott DiSavino; editing by Jonathan Oatis and Will Dunham)