U.S. Natural Gas Prices Retreat Amid High Storage Levels Despite Increased LNG Demand

(Reuters) — U.S. natural gas futures eased on Tuesday, pressured by large storage levels, after marking its best day in over two years in the previous session, helped by forecasts for more demand than previously expected with an increase in feedgas to Freeport LNG's export plant in Texas.

Front-month gas futures <NGc1> for June delivery on the New York Mercantile Exchange fell by 3.9 cents, or 1.9%, to settle at $1.991 per million British thermal units (MMBtu). Prices marked their best day in over two years in the previous session, and are up around 12% for the month.

"Yesterday, we had a strong rally on expectations of LNG feedgas returning to more normal levels. We have seen a pause in the growth of energy feedgas this morning, so the rallies are taking a moment to catch their breath," said Gary Cunningham, director of market research at Tradition Energy.

On a daily basis, LNG feedgas was at 12.8 billion cubic feet per day as the amount of gas flowing to Freeport LNG rose to 1.02 Bcf/d from 0.1 Bcf/d on Thursday, indicating that at least one of three liquefaction trains at Freeport LNG's export plant in Texas was exiting an outage.

Financial firm LSEG forecasts gas demand in the Lower 48 states, including exports, to rise to 93.0 Bcf/d next week, from 92.3 Bcf/d this week. Gas output in the Lower 48 U.S. states fell to an average of 96.5 Bcf/d so far in April, down from 100.8 Bcf/d in March, according to LSEG. That compares with a monthly record of 105.6 Bcf/d in December 2023.

"The market will still need to contend with some eventual loosening in supplies again, possibly by week's end, that will force focus back onto a huge storage level," energy advisory Ritterbusch and Associates said in a note.

"With storage at such a large level, price advances prompted by production slippage and/or a pop in LNG export activity could prove unsustainable across most of next month because such brief shifts in the balances will hardly make a dent in the big supply overhang."

In the spot market, power and gas prices in many states, including Texas, California and Arizona, have traded below zero several times this spring due to low demand, ample renewable power supplies and pipeline maintenance that has trapped gas in Texas.

Meanwhile, Europe gas prices edged higher as falling demand due to warmer temperatures was offset by lower liquefied natural gas (LNG) supply and curbed flows of gas from Norway due to maintenance.

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