NEW YORK: US natural gas futures fell about 3percent on Tuesday on record output and forecasts for less hot weather over the next two weeks than previously expected as Tropical Storm Edouard approaches the Gulf Coasts of Texas and Louisiana.
Prices were also depressed by a slight reduction in gas flows to Freeport LNG’s export plant in Texas as Edouard approaches the region. Tropical storms can reduce gas demand by knocking out power to homes and businesses and disrupting operations at LNG export plants.
Front-month gas futures for October delivery on the New York Mercantile Exchange (NYMEX) fell 7.4 cents, or 2.5percent, to USD2.861 per million British thermal units (mmBtu). On Monday, the contract closed at its highest since July 10.
Financial firm LSEG said average gas output in the US Lower 48 states rose to a record 111.5 billion cubic feet per day (bcfd) in August, up from the prior all-time monthly high of 110.7 bcfd in July.
Record output and mild spring weather this year have allowed energy firms to keep the amount of gas in inventory higher than the five-year (2021-2025) average since March.
But with hot weather last week, analysts said the amount of gas in storage likely eased to 4.8percent above normal during the week ended August 28, down from 5.5percent above normal in the previous week, according to estimates ahead of the weekly federal inventory report on Thursday.
Gas inventories have remained in surplus despite weeks of above-normal temperatures this summer.
Meteorologists forecast the weather will remain mostly warmer than normal through September 16, pushing power generators to continue burning more gas than usual to keep air conditioners running. About 40percent of US power generation comes from gas-fired plants.
LSEG projected average gas demand in the Lower 48 states, including exports, would slide from 111.7 bcfd this week to 108.8 bcfd next week. Those forecasts were similar to LSEG’s outlook on Monday.
Average gas flows to the nine big US LNG export plants rose to 18.3 bcfd so far in September, up from 17.2 bcfd in August. That is still short of the monthly record high of 18.8 bcfd in April.
Freeport LNG’s export plant in Texas, however, was on track to pull in around 1.9 bcfd of feedgas on Tuesday, down from an average of 2.1 bcfd over the past five days.
Analysts noted the plant could be reducing feedgas due to Tropical Storm Edouard, which is expected to hit near the Texas-Louisiana coast later on Tuesday. Like other energy firms with facilities in the area, officials at Freeport LNG said on Monday that they were monitoring the storm.
The US became the world’s biggest LNG exporter in 2023, surpassing Australia and Qatar, as surging global prices fed demand for more low-cost US gas.
Around the world, gas was trading near 43-month highs of around USD24 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe and USD23 at the Japan-Korea Marker (JKM) benchmark in Asia.
Global gas prices have spiked in recent years primarily due to supply disruptions linked to Russia’s invasion of Ukraine in 2022 and the US-Israeli war with Iran this year.
Prices in the US, however, have not reacted much to the war in Iran because the US produces all the gas it consumes domestically and US LNG companies are already liquefying as much fuel as they can.
No matter how high global gas prices go, the US cannot export much more LNG until units under construction enter service in coming months and years.
Comments