US natgas prices hold near one-week high on lower daily output

U.S. natural gas futures held near a one-week high on Monday on a big daily drop in U.S. output and much higher global gas prices.

Capping those gains were forecasts for milder weather and lower demand over the next two weeks than previously expected.

Front-month gas futures for October delivery on the New York Mercantile Exchange rose 0.9 cents, or 0.4%, to $2.614 per million British thermal units (mmBtu) at 9:12 a.m. EDT (1312 GMT), putting the contract on track for its highest close since Sept. 1 for a second day in a row.

Even though U.S. gas prices fell about 6% last week, speculators switched their net short futures and options position on the New York Mercantile and Intercontinental Exchanges to net long, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.

In Europe, gas futures jumped 7% to a two-week high around $12 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark due to ongoing strikes at Chevron’s liquefied natural gas (LNG) projects in Australia and gas supply maintenance outages in Norway.

Australia, Qatar and the U.S. are the world’s three biggest LNG producers. Chevron’s Australia facilities account for over 5% of global supply.

In Texas, power demand in the Electric Reliability Council of Texas (ERCOT) dropped as the weather turned more mild after breaking the monthly record for September every weekday last week as homes and businesses cranked up air conditioners to escape a brutal heat wave.

Last week’s demand, however, remained below the Texas grid’s all-time high of 85,435 MW set on Aug. 10.

Extreme heat causes utilities to burn more gas to keep air conditioners humming, especially in Texas. In 2022, about 49% of the state’s power came from gas-fired plants, with most of the rest coming from wind (22%), coal (16%), nuclear (8%) and solar (4%), federal energy data showed.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the lower 48 U.S. states held at 102.3 billion cubic feet per day (bcfd) so far in September, the same as the record high hit in August.

On a daily basis, however, output was on track to drop about 2.6 bcfd to a preliminary 12-week low of 100.1 bcfd on Monday. That would be the biggest one-day decline since early August, but energy traders noted preliminary data is often revised later in the day.

Meteorologists forecast the weather would remain mostly near normal from Sept. 12-21 before turning hotter than usual from Sept. 22 through at least Sept. 26.

With seasonally cooler weather coming, LSEG forecast U.S. gas demand, including exports, will slide from 99.2 bcfd this week to 95.4 bcfd next week. Those forecasts were lower than LSEG’s outlook on Friday.

Gas flows to the seven big U.S. LNG export plants rose to an average of 12.5 bcfd so far in September, up from 12.3 bcfd in August. That compares with a monthly record of 14.0 bcfd in April.

On a daily basis, however, LNG feedgas fell to a preliminary eight-month low of 10.0 bcfd due mostly to a reduction at Freeport LNG’s plant in Texas.