NEW YORK: US natural gas futures fell to a three-week low on Friday on forecasts for less hot weather and lower cooling demand than previously expected and despite expectations US liquefied natural gas (LNG) exports will rise as Gulf of Mexico plants boost output after finishing maintenance work.
Demand for US LNG has been growing in Europe and Asia, where gas prices were almost quadruple US prices.
Front-month gas futures fell 7.2 cents, or 1.8%, to settle at $3.861 per million British thermal units (mmBtu), their lowest close since July 19.
For the week, the contract was down about 6%, its biggest weekly percentage loss since February. Last week it gained almost 6%.
In the power market, the Electric Reliability Council of Texas (ERCOT), grid operator for most of the state, projected hot weather next week would push peak demand over the current high for the year of 72,856 megawatts (MW) set on July 26 and the grid's all-time high of 74,820 MW set in August 2019.
In the Atlantic basin, Tropical Depression Fred was expected to strengthen into a storm as it marches toward South Florida on Saturday. Traders noted Fred would likely result in cooler weather and power outages that would reduce gas demand but not affect output much since Florida produces almost no gas.
Data provider Refinitiv said gas output in the US Lower 48 states rose to an average of 92.0 billion cubic feet per day (bcfd) so far in August from 91.6 bcfd in July. That compares with an all-time high of 95.4 bcfd in November 2019.
Refinitiv projected average US gas demand, including exports, would rise from 92.2 bcfd this week to 92.8 bcfd next week as LNG exports increase, before sliding to 92.4 bcfd as the weather turns less hot and air conditioning use declines. The forecast for next week was a little lower than Refinitiv expected on Thursday.
The amount of gas flowing to US LNG export plants was expected to jump to a four-week high of 10.9 bcfd on Friday from an eight-week low of 9.3 bcfd on Tuesday as several Gulf Coast plants, including Cameron and Sabine in Louisiana and Freeport in Texas, returned to near full service.
That compares with an average for LNG feedgas of 10.2 bcfd so far in August, 10.8 bcfd in July and a record 11.5 bcfd in April.
With European and Asian gas both trading over $15 per mmBtu, compared with around $4 for the US fuel, analysts said buyers around the world would keep purchasing all the LNG the United States can produce. Prices at the Title Transfer Facility (TTF) in the Netherlands, the European benchmark, hit a record high on Wednesday.
US pipeline exports to Mexico have slipped to an average of 6.3 bcfd so far in August from 6.6 bcfd in July and a record 6.7 bcfd in June.