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U.S. natural gas futures extended losses on Friday, weighed down by rising output and forecasts for less demand over the next two weeks than previously expected.
Front-month gas futures for September delivery on the New York Mercantile Exchange were down 3.3 cents, or 1.2%, to $2.73 per million British thermal units (mmBtu) at 10:24 a.m. EDT (1424 GMT), after dropping 6.6% on Thursday. However, the contract was still up 5.8% so far this week.
“The biggest factor is that our production is still going strong. The EIA storage report certainly has shown that the production is strong enough to meet the domestic demand despite the abnormally high temperatures for the last week,” said Zhen Zhu, managing consultant at C.H. Guernsey and Co in Oklahoma City.
The U.S. Energy Information Administration (EIA) reported on Thursday that utilities added 29 billion cubic feet (bcf) of gas into storage during the week ended Aug 4.
That was slightly bigger than the 25-bcf build analysts forecast in a Reuters poll, and lifted stockpiles to 3.030 trillion cubic feet (tcf), 11% above the five-year average.
Power demand in Texas hit an all-time high on Thursday for the third time this week and will likely break that record again as homes and businesses keep their air conditioners cranked up during the lingering heatwave, according to forecasts by the Electric Reliability Council of Texas (ERCOT), the state’s power grid operator.
Extreme heat boosts the amount of gas burned to produce power for cooling, especially in Texas, which gets most of its electricity from gas-fired plants. In 2022, about 49% of the state’s power came from gas-fired plants, with most of the rest from wind (22%), coal (16%), nuclear (8%) and solar (4%), federal energy data showed.
Meteorologists forecast the weather in the lower 48 states will remain hotter than normal through at least Aug. 26.
Data provider Refinitiv forecast U.S. gas demand, including exports, would rise from 103.0 billion cubic feet per day (bcfd) this week to 104.5 bcfd next week as power generators burn more of the fuel and exports rise. The forecast for next week was lower than Refinitiv’s outlook on Thursday.
Refinitiv said average gas output in the U.S. lower 48 states was 101.9 bcfd so far in August, nearly the same as the 101.8 bcfd in July. That compares with a monthly record of 102.2 bcfd in May.
Gas flows to the seven big U.S. LNG export plants have fallen from an average of 12.7 bcfd in July to 12.3 bcfd so far in August, mainly due to reductions at Venture Global LNG’s Calcasieu facility in Louisiana. That compares with a monthly record of 14.0 bcfd in April.
The U.S. is on track to become the world’s biggest LNG supplier in 2023 – ahead of recent leaders Australia and Qatar – as higher global prices feed demand for U.S. exports due to supply disruptions and sanctions linked to the war in Ukraine.
Dutch and British wholesale gas prices mostly fell as the prospect of strikes at Australian LNG facilities appeared to ease after companies involved began talks to avert industrial action.
In 2022, roughly 69%, or 7.2 bcfd, of U.S. LNG exports went to Europe as shippers diverted cargoes from Asia to get higher prices. In 2021, when prices in Asia were higher, just 35%, or about 3.3 bcfd, of U.S. LNG exports went to Europe.
With the return of higher gas prices in Asia this year, analysts said they expect U.S. LNG exports to Asia will increase. Just 19%, or 2.1 bcfd, of U.S. LNG exports went to Asia during the first half of 2023, while 70%, or 8.0 bcfd, went to Europe.
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