HomeNewsUS natgas prices ease to 6-week low on rising output, lower LNG feedgas

US natgas prices ease to 6-week low on rising output, lower LNG feedgas

7/2/2024

U.S. natural gas futures eased about 1% to a six-week low on rising output, forecasts for less demand over the next two weeks than previously expected due to lower liquefied natural gas (LNG) feedgas and an ongoing oversupply of gas in storage.

Front-month gas futures for August delivery on the New York Mercantile Exchange fell 2.4 cents, or 1%, to $2.454/MMBtu, putting the contract on track for its lowest close since May 15 for a second day in a row.

In other news, a federal judge dealt U.S. President Joe Biden's climate agenda a setback by blocking the Democrat's administration from continuing to pause the approval of applications to export LNG.

In Texas, the Electric Reliability Council of Texas (ERCOT), power grid operator for most of the state, said peak demand this week will come close to but not break the record for the month of July as homes and businesses crank up their air conditioners to escape a heat wave.

In the spot market, next-day gas prices at the Waha hub in West Texas plunged by about 123% to a negative $0.52/MMBtu for Tuesday as pipeline constraints trap gas in the Permian Shale again.

That is the third time in six days Waha prices fell into negative territory during the current heat wave and the 20th time so far this year. Next-day Waha prices first averaged below zero in 2019. It happened 17 times in 2019, six in 2020, none in 2021 and 2022, and once in 2023.

In the Caribbean Sea, Hurricane Beryl, an extremely dangerous major hurricane, will hit Jamaica on Wednesday before slamming into Mexico's Yucatan Peninsula on Friday, according to the latest U.S. National Hurricane Center (NHC) outlook.

After marching across the Yucatan, the NHC projected Beryl will weaken into a tropical storm by the time it enters the Bay of Campeche in the Gulf of Mexico, where Mexico produces much of its oil, on Saturday before approaching the Texas-Mexico border on Sunday.

Supply and demand. Financial firm LSEG said gas output in the Lower 48 U.S. states rose to an average of 101.5 Bft3d so far in July. That was up from an average of 100.1 Bft3d in June and a 17-month low of 99.5 Bft3d in May as many producers reduced drilling activities after prices fell to 3-1/2-year lows in February and March. U.S. output hit a monthly record high of 105.5 Bft3d in December 2023.

Meteorologists projected weather across the Lower 48 states would remain hotter than normal through at least July 17.

With hotter weather expected next week, LSEG forecast average gas demand in the Lower 48, including exports, will rise from 98.5 Bft3d this week to 104.5 Bft3d next week. Those forecasts were lower than LSEG's outlook on Monday.

Gas flows to the seven big U.S. LNG export plants fell to 12.2 Bft3d so far in July, down from 12.8 Bft3d in June and a monthly record high of 14.7 Bft3d in December 2023.

That decline was due mostly to an expected drop in feedgas at Cheniere Energy's 4.5- Bft3d Sabine Pass in Louisiana to a one-week low of 3.7 Bft3d on Tuesday, down from 4.1 Bft3d on Monday and an average of 4.0 Bft3d over the prior seven days.

 

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