Hot weather, LNG exports drive US natural gas prices up three per cent
US natural gas futures climbed about three per cent to a one-week high on Monday on forecasts for hotter weather over the next two weeks than previously expected and rising flows of gas to liquefied natural gas (LNG) export plants.
Front-month gas futures for August delivery on the New York Mercantile Exchange were up 10 cents, or three per cent, to $3.414 per million British thermal units at 09:09 EDT (13:09 GMT), putting the contract on track for its highest close since July 2.
That price increase occurred despite rising output and forecasts for lower demand over the next two weeks than previously expected. Even though gas futures have dropped about 14 per cent over the past three weeks, speculators last week boosted their net long futures and options positions on the New York Mercantile Exchange and Intercontinental Exchange to their highest levels since early-April, the US Commodity Futures Trading Commission's Commitments of Traders report showed.
Meteorologists slightly reduced their forecasts for hotter weather for this week but continued to project weather across the Lower 48 US states will remain mostly warmer than normal through at least July 29, especially in late July.
Even though the weather has remained above normal so far this summer, analysts expect energy firms to keep injecting more gas into storage than usual in coming weeks. That's because output hit a record high in June and was on track to top that in July, while gas flows to LNG export plants have so far languished since hitting a record in April.
There is currently about six per cent more gas in storage than the five-year (2020-2024) normal, and analysts expect that surplus to grow in coming weeks. Some analysts, however, noted that an expected rise in LNG exports should start to chip away at that surplus later this year.
Supply and demand
LSEG said average gas output in the Lower 48 has risen to 106.8 billion cubic feet per day so far in July, up from a monthly record high of 106.4 bcfd in June.
LSEG forecast average gas demand in the Lower 48, including exports, would slide from 107.8 bcfd this week to 106.8 bcfd next week. Those forecasts were lower than LSEG's outlook on Friday.
The US National Hurricane Center said a tropical disturbance off the east coast of Florida has about a 30 per cent chance of strengthening into a tropical storm as it moves west into the Gulf of Mexico off Louisiana, Mississippi, Alabama and Florida over the next week.
Analysts have noted that tropical storms in the Gulf can knock some production out of service, but noted that only about two per cent of all US gas output comes from the federal offshore Gulf of Mexico.
The analysts noted that storms were more likely to be demand-destroying events as they knock out power to homes and businesses, especially if they shut a liquefied natural gas (LNG) export plant.
The average amount of gas flowing to the eight big US LNG export plants has risen to 15.8 bcfd so far in July as liquefaction units at some plants slowly exited maintenance reductions and unexpected outages. That was up from 14.3 bcfd in June and 15 bcfd in May, but remained below the monthly record high of 16 bcfd in April.
On a daily basis, LNG export feedgas was on track to rise to a three-month high of 16.6 bcfd on Monday with flows to US energy company Venture Global LNG's 3.2-bcfd Plaquemines plant in Louisiana up to a record 2.9 bcfd on Sunday, according to LSEG data.
(Reporting by Scott DiSavino; Editing by Paul Simao)
