US natural gas futures eased on Friday as the market focused more on forecasts for less hot weather in a couple weeks than on an expected increase in liquefied natural gas (LNG) exports. Front-month gas futures for August delivery on the New York Mercantile Exchange fell 1.6 cents, or 0.7%, to settle at $2.308 per million British thermal units (mmBtu).
For the week, the contract was up about 6% after falling over 8% last week. For the month, the contract declined about 6%, down for a seventh month in a row. That is the most monthly declines since April 2009 when it fell for a record 10 consecutive months. Since November, the front-month has plunged about 50%.
For the quarter, the contract fell about 13%, the third quarterly decline in a row. Before this week, traders noted the front-month had traded near multi-year lows since the end of May as near-record production and moderate spring weather allowed utilities to inject huge amounts of gas into stockpiles, shrinking a massive storage deficit and removing any concerns about shortages next winter.
On June 20, the front-month closed at $2.185 per mmBtu, its lowest settlement since May 27, 2016.
The amount of gas in storage has remained below the five-year average since September 2017. It fell by as much as 33% below that average in March 2019. Analysts forecast inventories will reach a near-normal 3.7 trillion cubic feet (tcf) by the end of the summer injection season at the end of October.
Output in the Lower 48 US states slipped to 89.62 billion cubic feet per day (bcfd) on Thursday from a nine-week high of 90.32 bcfd on Tuesday, according to data provider Refinitiv. That compares with an all-time daily high of 90.33 bcfd on April 20 and an average of 81.99 bcfd during this week last year.
With the weather expected to warm for the summer, Refinitiv projected demand in the Lower 48 states would rise to 87.9 bcfd next week and 89.3 bcfd in two weeks from 83.4 bcfd this week as power generators burn more gas to keep air conditioners humming.
The forecast for next week is up from Refinitiv's 87.5 bcfd estimate on Thursday due to projections more gas will flow to LNG export terminals than previously expected.
LNG exports rose to a record high 6.1 bcfd this week as new units prepare to enter service at several terminals, including Cheniere Energy Inc's Corpus Christi, Sempra Energy's Cameron in Louisiana, Freeport LNG's Freeport in Texas and Kinder Morgan Inc's Elba in Georgia.
Analysts, however, noted those new units will add to the current global LNG glut. Traders said they would not be surprised to see LNG buyers start to reject some US cargoes with gas prices at or near multi-year lows in Europe and Asia. With storage in Northern Europe filling fast, gas at the Title Transfer Facility or TTF in the Netherlands fell to a record low of $3.08 per mmBtu on Friday, according to Refinitiv data going back to 2005. In Mexico, meanwhile, flows on the Valley Crossing line, which were expected to start over the past week or so, were delayed by an arbitration case in Mexico over pipeline costs.
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