U.S. natgas prices slide 2% on rising output, lower demand forecasts
U.S. natural gas futures slid about 2% on Tuesday on a slow increase in output and forecasts for less demand over the next two weeks than previously expected, even as a brutal heat wave blankets much of the country.
On its second to last day as the front-month, gas futures for July delivery on the New York Mercantile Exchange fell 4.5 cents, or 1.6%, to $2.766 per MMBtu.
Even though gas prices fell about 7% over the past two weeks, speculators last week boosted their net long futures and options positions on the New York Mercantile and Intercontinental Exchanges to their highest since April 2022 for a second week in a row, according to the U.S. Commodity Futures Trading Commission's Commitments of Traders report.
In the spot market, meanwhile, gas prices at the Waha hub in West Texas turned negative for the first time since May as pipe maintenance trapped gas in the Permian Shale even as demand soars as consumers crank up their air conditioners to escape the heat wave.
Supply and demand. Financial firm LSEG said gas output in the Lower 48 U.S. states rose to an average of 98.5 Bft3d so far in June, up from a 25-month low of 98.1 Bft3d in May. That compares with a monthly record high of 105.5 Bft3d in December 2023.
On a daily basis, however, output was on track to fall by about 3.0 Bft3d to a preliminary one-week low of 97.4 Bft3d on Tuesday, down from an 11-week high of 100.4 Bft3d on Monday. Analysts have noted preliminary output numbers are often revised up later in the day.
Analysts said the production increase, which started in late May, was a sign that some drillers were slowly boosting output after a 47% jump in futures prices in April and May. Prices were also up about 5% so far in June.
So far in June, CEOs at EQT and Chesapeake Energy said their companies have started to boost output.
Overall, U.S. gas production was still down around 8% so far in 2024 after several energy firms, including EQT and Chesapeake, delayed well completions and cut drilling activities after prices fell to 3-1/2-year lows in February and March.
Chesapeake is on track to overtake EQT as the biggest U.S. gas producer after Chesapeake completes its planned merger with Southwestern Energy.
Meteorologists projected weather across the Lower 48 states would remain hotter than normal through at least July 10. LSEG forecast that heat would prompt power generators to burn more gas to keep air conditioners humming.
But with less heat forecast next week, LSEG forecast average gas demand in the Lower 48, including exports, will slide from 103.0 Bft3d this week to 100.3 Bft3d next week. Those forecasts were lower than LSEG's outlook on Monday.
Gas flows to the seven big U.S. LNG export plants held at 12.9 Bft3d so far in June, the same as in May.
That remains well below the monthly record high of 14.7 Bft3d in December 2023 due to ongoing plant and pipeline maintenance at Freeport LNG in Texas and several Louisiana facilities, including Cameron LNG, Cheniere Energy's Sabine Pass and Venture Global's Calcasieu Pass.
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