U.S. natural gas futures were up about 2% on Thursday after paring earlier gains on a bigger than expected weekly storage build.
Earlier in the day, gas prices were up over 5% ona drop in daily output, a rise in crude futures, forecasts for higher gas demand over the next two weeks than previously expected and signs that Freeport LNG’s liquefied natural gas (LNG) export plant in Texas started to pull in more feedgas.
The U.S. Energy Information Administration (EIA) said utilitiesadded 57billion cubic feet (bcf) of gas into storage during the week ended Sept. 8.
That was more than the 48-bcf build analysts forecast in a Reuters poll and compareswith an increase of 74 bcf in the same week last year and a five-year (2018-2022) average increase of 76 bcf.
Last week’s injection included a 6-bcf build in the South Central region, which includes Texas, where a long-lasting, brutal heat wave caused energy firms to pull gas during the past seven weeks, the longest streak of withdrawals for the region during the summer since 2017.
Even though last week’s build was bigger than expected, analysts said it was still smaller than usual for this time of year because power generators were still burning lots of gas to keep air conditioners humming during the lingering heat wave.
Front-month gas futures NGc1 for October delivery on the New York Mercantile Exchange rose 4.3 cents, or 1.6%, to $2.723 per million British thermal units at 10:45 a.m. EDT (1445 GMT).
Before EIA released the storage report, gas futures were up about 3.3%.
Oil prices climbed about 2% on Thursday to their highest levels since November 2022 on forecasts for tighter supplies for the rest of 2023.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the lower 48 U.S. states has eased to 102.2 billion cubic feet per day (bcfd) so far in September, down from a record 102.3 bcfd in August.
Most of that decline occurred this week. On a daily basis, output was on track to drop about 2.8 bcfd over the past four days to a preliminary two-month low of 99.9 bcfd on Thursday. Energy traders noted preliminary data is often revised later in the day.
Meteorologists forecast the weather in the lower 48 states would remain near normal until Sept. 18 before turning mostly warmer than usual in the Sept. 22-29 period. Traders, however, noted that above normal temperatures in late September were not that hot, with averages of around 72 degrees Fahrenheit (22.2 Celsius) versus a normal of 70 F for that time of year.
With seasonally cooler weather coming, LSEG forecast U.S. gas demand, including exports, will slide from 100.5 bcfd this week to 96.2 bcfd next week. Those forecasts were higher than LSEG’s outlook on Wednesday.
Gas flows to the seven big U.S. LNG export plants have averaged 12.6 bcfd so far in September, up from 12.3 bcfd in August. That compares with a monthly record of 14.0 bcfd in April.
On a daily basis, however, LNG feedgas was only on track to reach 12.4 bcfd on Thursday due mostly to a reduction at Freeport LNG this week.
The 2.1-bcfd Freeport facility was on track to pull in about 0.9 bcfd of gas on Thursday, up from an average of 0.3 bcfd over the past four days, according to LSEG data. Sources told Reuters that Freeport had canceled four cargoes since reducing feedgas this week. Last week, the plant was pulling in about 1.8 bcfd of pipeline gas.
Looking ahead, traders noted Berkshire Hathaway Energy’s 0.8-bcfd Cove Point LNG export plant in Maryland was on track to shut for about a week of planned maintenance around Sept. 21-29, according to company notices to customers. Cove Point shuts every year in the autumn for maintenance. In 2022, it shut from around Oct. 1-27, according to LSEG data.
Source: Reuters (Reporting by Scott DiSavino; Editing by Paul Simao and Timothy Gardner)