US natgas futures slip 2pc with drop in crude prices, rising output

US natural gas futures slipped about 2% on Tuesday, following a 7% drop in crude prices, on a rise in gas output and forecasts for cooler weather and lower demand in late September.

That gas price decline came despite a daily increase in liquefied natural gas (LNG) exports following hurricane shutdowns in late August and record sales to Mexico.

Front-month gas futures fell 6.1 cents to $2.527 per million British thermal units at 9:46 a.m. EDT (1346 GMT).

Gas speculators boosted their net long positions on the New York Mercantile and Intercontinental Exchanges for a sixth week in a row last week to their highest since January 2018 on expectations energy demand will rise as the economy rebounds once state governments lift more coronavirus-linked lockdowns.

Data provider Refinitiv said output in the Lower 48 US states was on track to rise to 88.0 billion cubic feet per day (bcfd) in September, up from a three-month low of 87.6 bcfd in August.

With exports rising and temperatures expected to remain warmer-than-normal through mid September, Refinitiv projected US demand, including exports, would rise from an average of 84.0 bcfd this week to 85.0 bcfd next week. That is higher than Refinitiv's forecasts on Friday before the long US Labor Day weekend.

In late September, however, demand is expected to decline as air conditioning use drops as the weather cools.

The amount of gas flowing to US LNG export terminals was on track to rise over 1.0 bcfd to 5.0 bcfd on Tuesday, the biggest one-day gain since March, as Cheniere Energy Inc's Sabine Pass plant in Louisiana continues to ramp up after shutting for Hurricane Laura.

Pipeline exports to Mexico were on track to rise to 6.2 bcfd in September, topping August's 5.9-bcfd record high.