U.S. Gas Prices Near 3-Week High Despite Weaker Demand
(Reuters) — U.S. natural gas futures held near a three-week high on Wednesday as lower output offset forecasts for weaker demand over the next two weeks than previously expected.
Energy traders noted much of the demand decline will come from lower gas flows to liquefied natural gas (LNG) export plants during planned maintenance.
Gas futures for July delivery on the New York Mercantile Exchange fell 0.6 cents, or 0.2%, to settle at $3.716 per million British thermal units. On Tuesday, the contract closed at its highest level since May 9 for a second day in a row.
In Canada, spot gas prices at the AECO hub in Alberta have traded near an eight-month low this week (6 cents per MMBtu on Tuesday and 10 cents on Wednesday) in a sign that wildfires had reduced demand in Alberta and trapped some of the fuel in the nation's biggest gas-producing province.
AECO prices have averaged $1.41 per MMBtu this year, 96 cents in 2024 and $2.28 over the prior five years (2019-2023).
Supply and Demand
Financial firm LSEG said average gas output in the Lower 48 U.S. states has fallen to 103.9 billion cubic feet per day so far in June, down from 105.2 Bcf/d in May and a monthly record high of 106.3 Bcf/d in March.
On a daily basis, output was on track to drop to a preliminary three-month low of 103 Bcf/d on Wednesday, down from 103.4 Bcf/d on Tuesday and an average of 105.3 Bcf/d over the prior seven days. The decline on Tuesday was less than previously forecast. Analysts noted preliminary data is often revised later in the day.
Gas exports from Canada to the U.S., meanwhile, were on track to rise to 8.8 Bcf/d on Wednesday, up from 8.0 Bcf/d on Tuesday and 7.9 Bcf/d on Monday. That reading compares with a recent highs of 9.1 Bcf/d on May 22 and May 23 and an average of 8.6 Bcf/d over the past two weeks (May 21-June 4), according to LSEG data.
Gas exports from Canada to the U.S. were around 8.2 Bcf/d in June 2024 and averaged 7.3 Bcf/d during the month over the past five years (2020-2024). They set a record high for the month of June of 9.7 Bcf/d in 2022.
LSEG forecast average gas demand in the Lower 48, including exports, will rise from 94.8 Bcf/d this week to 97.1 Bcf/d next week. Those forecasts were lower than LSEG's outlook on Tuesday.
The average amount of gas flowing to the eight big U.S. LNG export plants has fallen to 13.5 Bcf/d so far in June, down from 15 Bcf/d in May and a monthly record high of 16 Bcf/d in April.
Energy traders said LNG feedgas reductions over the past month or so were primarily due to normal spring maintenance, including work at Cheniere Energy's plants.
Gas flows to Cheniere's 4.5-Bcf/d Sabine Pass facility in Louisiana have held at a 23-month low of around 3 Bcf/d since May 31, down from an average of 4.5 Bcf/d during May, while feedgas to the company's 3.9-Bcf/d Corpus Christi plant in Texas held at a two-week low of 1.5 Bcf/d on Tuesday and Wednesday, down from an average of 2 Bcf/d in May.
Analysts have noted that gas flows to Sabine would likely remain reduced for about three weeks of maintenance from around May 31-June 22.
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