NEW YORK: US natural gas futures eased to a one-week low on Monday on near-record output, ample supplies of the fuel in storage, and forecasts for less hot weather and lower demand through late August than previously expected.
That price decline came despite strong liquefied natural gas exports and forecasts of stronger demand this week than previously expected.
The heat this week means homes and businesses will likely keep their air conditioners cranked up, forcing power generators to burn more gas than usual for this time of year. More than 40% of the electricity produced in the United States comes from gas-fired power plants.
Front-month gas futures for September delivery on the New York Mercantile Exchange fell 1.7 cents, or 0.6%, to $2.97 per million British thermal units (mmBtu) at 9:13 a.m. EDT (1313 GMT).
A lack of big price swings for the front-month in recent weeks cut historic or actual 30-day close-to-close futures volatility to 48.7%, the lowest since April 2024.
Historic daily volatility hit a record high of 177.7% in February 2022 and a record low of 7.3% in June 1991. Historic volatility has averaged 74.8% so far this year, versus 73.7% in 2024 and a five-year (2019 to 2023) average of 64.3%.
Looking forward, traders are showing signs that they are not worried about having enough gas supplies for this winter, with the premium of futures for March over April 2026 on track to fall to a record low of around 18 cents per mmBtu on Monday.
The industry calls the March-April spread the “widow maker” because rapid price moves resulting from changing weather forecasts have forced some speculators out of business, including the Amaranth hedge fund, which lost more than $6 billion in 2006.
Traders use the March-April and October-November spreads to bet on winter weather forecasts and supply and demand. March is the last month of the winter-heating season when utilities pull gas out of storage, and October is the last month of the summer cooling season when utilities inject gas into storage.
Financial firm LSEG said average gas output in the Lower 48 states rose to 108.4 billion cubic feet per day so far in August, up from July’s monthly record high of 107.9 bcfd.
Meteorologists forecast the weather would remain hotter than normal through at least August 26 but would be less hot than previously forecast for the period.