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U.S. natgas futures slide 4% on record output, lower demand


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That price decline came despite a 5% jump in European gas prices on concerns about Russian supplies and forecasts for temperatures across much of the Untied States to remain hotter than normal through at least mid August.

So far this summer, electric companies have already burned record amounts of gas to meet soaring power use to keep air conditioners humming. Power demand in Texas was expected to break records again this week.

Gas-fired plants have provided over 40% of U.S. power in recent weeks, according to federal energy data, even though gas futures soared about 52% in July. That is partially because coal prices keep hitting fresh record highs, making it uneconomical for some generators to use their coal-fired plants.

One factor weighing on gas futures most of the summer has been the ongoing shutdown of the Freeport liquefied natural gas (LNG) export plant in Texas, which left more gas in the United States for utilities to inject into what are currently extremely low stockpiles.

Freeport, the second-biggest U.S. LNG export plant, was consuming about 2 billion cubic feet per day (bcfd) of gas before it shut on June 8. Freeport estimated that the facility will return to partial service in October. Some analysts say the outage could last longer.

Front-month gas futures fell 35.6 cents, or 4.3%, to $7.927 per million British thermal units (mmBtu) at 8:00 a.m. EDT (1200 GMT), putting the contract on track for its lowest close since July 19.

So far this year, the front-month was up about 112% as much higher prices in Europe and Asia keep demand for U.S. LNG exports strong, especially since the amount of gas from Russia to Europe has dropped following Moscow’s invasion of Ukraine on Feb. 24.

Gas was trading around $62 per mmBtu in Europe and $45 in Asia.

GLJ

The United States became the world’s top LNG exporter during the first half of 2022. But no matter how high global gas prices rise, the United States cannot export any more LNG because its plants were already operating at full capacity.

GLJ

Russian gas exports on the three main lines into Germany – Nord Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route – rose to 2.5 bcfd on Monday from 2.4 bcfd on Sunday.

That compares with an average of 2.8 bcfd in July and 10.4 bcfd in August 2021.

TOP PRODUCER

U.S. gas futures lag far behind global prices because the United States is the world’s top producer, with all the fuel it needs for domestic use, while capacity constraints limit LNG exports.

Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 97.4 bcfd so far in August from a record 96.7 bcfd in July.

On a daily basis, however, output was on track to drop 1.4 bcfd to a preliminary 96.7 bcfd on Tuesday after soaring 2.4 bcfd to a daily record high of 98.4 bcfd on Friday. Preliminary data is often changed later in the day.

With hotter weather expected, Refinitiv projected that average U.S. gas demand including exports would rise from 99.6 bcfd this week to 100.2 bcfd next week. Those forecasts were lower than Refinitiv’s outlook on Monday.

The average amount of gas flowing to U.S. LNG export plants rose to 11.1 bcfd so far in August from 10.9 bcfd in July. That compares with a monthly record of 12.9 bcfd in March. The seven big U.S. export plants can turn about 13.8 bcfd of gas into LNG.



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