US Natural Gas Futures Hold Near 11-Week Low as LNG Exports Decline

(Reuters) — U.S. natural gas futures held near an 11-week low on Friday as forecasts for hotter weather, higher demand and less output than last month offset a drop in LNG exports due to the extended shutdown of the Freeport LNG export plant in Texas.

In Texas, power demand hit record levels again this week during a lingering heat wave.

Analysts said the Freeport shutdown should allow U.S. utilities to quickly rebuild low gas stockpiles for next winter.

The shutdown on June 8 reduced the amount of U.S. gas available to the rest of the world, especially Europe, where most U.S. LNG has gone as countries there wean themselves off Russian energy after Moscow's invasion of Ukraine in February.

Freeport, the second-biggest U.S. LNG export plant, consumes about 2 billion cubic feet per day (Bcf/d) of gas, so a 90-day shutdown would make about 180 billion cubic feet (Bcf) of additional gas available to the U.S. market.

Front-month gas futures for July delivery on the New York Mercantile Exchange (NYMEX) were up 1.4 cents, or 0.2%, at $6.253 per million British thermal units (MMBtu) at 8:21 a.m. EDT. On Thursday, the contract closed at its lowest since April 6.

That kept the contract in technically oversold territory, with a relative strength index (RSI) below 30 for a fifth day in a row for the first time since January 2020.

For the week, the front-month was down about 10% after dropping 22% last week, putting it on track to fall for a second week in a row for the first time since February. Those big declines in the July front-month pushed the premium of futures for August over July to a record high.

Despite recent declines, U.S. gas futures are still up about 69% so far this year as much higher prices in Europe and Asia keep demand for U.S. LNG exports strong, especially since Russia's invasion of Ukraine stoked fears Moscow might cut gas supplies to Europe.

Gas was trading around $41 per MMBtu in Europe and $37 in Asia. For the week, gas prices at the Title Transfer Facility (TTF) in the Netherlands, the European gas benchmark, were up about 6% after Russia reduced pipeline exports to Europe earlier in the week.

Russia kept pipeline exports at around 3.7 Bcf/d for a fourth day in a row on Thursday on the three mainlines into Germany - North Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany), and the Russia-Ukraine-Slovakia-Czech Republic-Germany route.

That compares with a recent high of 6.5 Bcf/d about two weeks ago, and an average of 11.6 Bcf/d in June 2021.

Data provider Refinitiv said average gas output in the U.S. Lower 48 states has slid to 95.0 Bcf/d so far in June from 95.2 Bcf/d in May. That compares with a monthly record of 96.1 Bcf/d in December 2021.

With hotter weather coming, Refinitiv projected average U.S. gas demand including exports would rise from 92.9 Bcf/d this week to 95.2 Bcf/d next week and 97.2 Bcf/d in two weeks. The forecast for next week was lower than Refinitiv's outlook on Thursday.

The amount of gas flowing to U.S. LNG export plants has fallen from an average of 12.5 Bcf/d in May to 11.3 Bcf/d so far in June due to the Freeport outage, according to Refinitiv. That compares with a monthly record of 12.9 Bcf/d in March.

The seven big U.S. export plants can turn about 13.6 Bcf/d of gas into LNG.

On a daily basis, output was on track to drop to 10.3 Bcf/d on Friday, the lowest since November 2021, due to the Freeport outage and small reductions at several other plants.

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