U.S. Natgas Prices Fall 4% to 9-Week Low on Forecasts for Less Heat, Demand

Traders also noted prices were depressed by rising output, the tremendous oversupply of gas still in storage and the slow return of the Freeport LNG export plant in Texas after shutting ahead of Hurricane Beryl.

Analysts said there was currently about 18% more gas in storage than is normal for this time of year.

Front-month gas futures for August delivery on the New York Mercantile Exchange fell 9.8 cents, or 4.2%, to $2.231 per million British thermal units (mmBtu) by 10:22 a.m. EDT (1422 GMT), putting the contract on track for its lowest close since May 8.

That price drop also pushed the front-month back into technically oversold territory for the seventh time in the last nine days.

Speculators last week cut their net long futures and options positions on the New York Mercantile and Intercontinental Exchanges for a third week in a row to their lowest since early May, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.

Even though the November-March heating season is still months away, the market already seems to be giving up on extreme cold this winter with the futures for March trading at a record low premium to April of just 19 cents per mmBtu.

March is the last month of the winter storage withdrawal season and April is the first month of the summer storage injection season. Since gas is a primarily a winter heating fuel, traders have said that summer prices should never trade above winter.

The industry calls the March-April spread the “widow maker” because rapid price moves on changing weather forecasts have forced some speculators out of business, including the Amaranth hedge fund, which lost more than $6 billion in 2006.

In other news, Saturday and Sunday were the hottest days so far this year and Monday and Tuesday are forecast to be even hotter, according to meteorologists.

That heat will likely force power generators to continue burning lots of gas to produce electricity to keep air conditioners humming. Those power generators burned a record 54.1 billion cubic feet per day (bcfd) of gas on July 9, according to LSEG data.

SUPPLY AND DEMAND

Financial firm LSEG said gas output in the Lower 48 U.S. states rose to an average of 102.3 bcfd so far in July, up from an average of 100.2 bcfd in June and a 17-month low of 99.5 bcfd in May.

U.S. output hit a monthly record high of 105.5 bcfd in December 2023.

Several producers cut output earlier in the year after futures prices dropped to 3-1/2-year lows in February and March. But higher prices in April, May and June prompted some drillers, including EQT and Chesapeake Energy, to return to the well pad.

Meteorologists projected weather across the Lower 48 states would remain mostly hotter than normal through at least July 30, but for some near-normal days from July 18-22.

With less hot weather coming, LSEG forecast average gas demand in the Lower 48, including exports, will slide from 106.3 bcfd to 103.8 bcfd next week. Those forecasts were lower than LSEG’s outlook on Friday.

Gas flows to the seven big U.S. LNG export plants fell to 11.8 bcfd so far in July after Freeport LNG in Texas shut ahead of Hurricane Beryl on July 7, down from 12.8 bcfd in June and a monthly record high of 14.7 bcfd in December 2023.

Week ended Week ended Year ago Five-year

July 12 July 5 July 12 average

Forecast Actual July 12 U.S. weekly natgas storage change (bcf): +38 +65 +43 +49 U.S. total natgas in storage (bcf): 3,237 3,199 2,959 2,744 U.S. total storage versus 5-year average 18.0% 18.7%

Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five-Year

Last Year Average Average

2023 (2018-2022) Henry Hub 2.24 2.33 2.64 2.66 3.60 Title Transfer Facility (TTF) 10.10 10.13 9.58 13.04 14.39 Japan Korea Marker (JKM) 12.33 12.37 11.44 14.39 14.31

LSEG Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days Two-Week Total Forecast Current Day Prior Day Prior Year 10-Year 30-Year

Norm Norm U.S. GFS HDDs 5 3 1 2 3 U.S. GFS CDDs 238 257 243 213 205 U.S. GFS TDDs 243 260 244 215 208

LSEG U.S. Weekly GFS Supply and Demand Forecasts

Prior Week Current Next Week This Week Five-Year

Week Last Year (2019-2023)

Average For

Month U.S. Supply (bcfd) U.S. Lower 48 Dry Production 102.1 102.6 102.6 102.0 95.5 U.S. Imports from Canada 8.2 8.2 7.5 N/A 7.8 U.S. LNG Imports 0.0 0.0 0.0 0.0 0.1 Total U.S. Supply 110.3 110.5 110.1 N/A 112.5

U.S. Demand (bcfd) U.S. Exports to Canada 1.4 1.3 1.6 N/A 2.3 U.S. Exports to Mexico 6.8 6.8 6.8 N/A 6.1 U.S. LNG Exports 11.7 11.6 12.0 12.7 8.6 U.S. Commercial 4.3 4.3 4.4 4.3 4.5 U.S. Residential 3.5 3.5 3.7 3.5 3.6 U.S. Power Plant 49.5 49.7 46.3 48.0 43.3 U.S. Industrial 21.6 21.6 21.6 21.3 21.3 U.S. Plant Fuel 5.0 5.1 5.1 5.1 4.9 U.S. Pipe Distribution 2.3 2.3 2.2 2.3 2.2 U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1 Total U.S. Consumption 86.4 86.6 83.4 84.6 79.9 Total U.S. Demand 106.3 106.3 103.8 N/A 96.9

N/A is Not Available

U.S. Northwest River Forecast Center (NWRFC) at The Dalles Dam Current Day Prior Day 2023 2022 2021

% of Normal % of Normal % of Normal % of Normal % of Normal

Forecast Forecast Actual Actual Actual Apr-Sep 74 75 83 107 81 Jan-Jul 76 76 77 102 79 Oct-Sep 78 78 76 103 81

U.S. weekly power generation percent by fuel – EIA

Week ended Week ended 2023 2022 2021

Jul 19 Jul 12 Wind 8 5 10 11 10 Solar 5 5 4 3 3 Hydro 5 6 6 6 7 Other 2 1 2 2 2 Petroleum 0 0 0 0 0 Natural Gas 45 47 41 38 37 Coal 18 18 17 21 23 Nuclear 17 17 19 19 20

SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu) Hub Current Day Prior Day Henry Hub 2.17 2.23 Transco Z6 New York 1.90 1.63 PG&E Citygate 2.90 3.13 Eastern Gas (old Dominion South) 1.61 1.47 Chicago Citygate 2.07 1.83 Algonquin Citygate 2.12 1.78 SoCal Citygate 2.10 2.59 Waha Hub 0.37 0.81 AECO 0.50 0.77

SNL U.S. Power Next-Day Prices ($ per megawatt-hour) Hub Current Day Prior Day New England 39.75 46.25 PJM West 50.00 49.50 Ercot North 22.75 25.25 Mid C 30.00 84.00 Palo Verde 42.25 80.00 SP-15 39.75 63.50

(Reporting by Scott DiSavino; Editing by Kirsten Donovan)