HomeNewsU.S. natgas prices rise 3% on rising LNG feedgas and near record heat

U.S. natgas prices rise 3% on rising LNG feedgas and near record heat

8/2/2024

U.S. natural gas futures climbed about 3% on Friday as the amount of gas flowing to liquefied natural gas (LNG) export plants rises and on forecasts for near record-breaking heat over the next few days that was on track to boost the amount of gas power generators burn to an all-time high.

Front-month gas futures for September delivery on the New York Mercantile Exchange rose $0.05, or 2.5%, to $2.018/MMBtu. For the week, the contract was little changed after falling about 14% during the prior two weeks.

Prices climbed despite a bearish increase in output and the tremendous amount of gas still in storage even though inventory builds have been smaller than normal in 11 of the past 12 weeks because several producers cut output earlier in the year after futures prices dropped to 3.5-year lows in February and March. There was currently about 16% more gas in storage than is normal for this time of year.

Higher prices in April and May, however, prompted some drillers, including EQT and Chesapeake Energy, to boost output. But after prices dropped 22% in July, some analysts said producers could keep their drilling activities lower for longer.

Supply and demand. Financial firm LSEG said gas output in the Lower 48 states rose to an average of 103.8 Bft3d so far in August, up from 103.4 Bft3d in July. That compares with a monthly record high of 105.5 Bft3d in December 2023.

Meteorologists slightly reduced their temperature forecasts for the Lower 48 states, which is part of the reason power demand did not hit an all-time high on Thursday as some analysts predicted.

The forecasters now expect temperatures across the country to rise from an average of 82.6°F (28.1°C) on Thursday to 82.7°F on Friday and 82.8°F on Monday, according to LSEG data.

That would remain below the daily record high average temperature of 83.0°F set on July 20, 2022, when power demand peaked at an all-time high of 742,600 megawatts (MW), LSEG and federal energy data showed. U.S. power demand, however, could still hit a record high on Friday or Monday.

To keep air conditioners humming during near record heat, LSEG forecast power generators would burn about 55.3 Bft3d of gas on Friday, which would top the all-time high of 54.1 Bft3d reached on July 9 when generators had to burn more gas due to a lack of wind power. But the amount of wind power was on track to rise from 4% last week to around 10% this week.

Even though meteorologists forecast it would be slightly hotter on Monday, generators were only expected to burn about 53.8 Bft3d of gas.

With more heat coming, LSEG forecast average gas demand in the Lower 48, including exports, will rise from 105.5 Bft3d this week to 110.8 Bft3d next week before sliding to 106.1 Bft3d in two weeks. The forecast for next week was higher than LSEG's outlook on Thursday.

Gas flows to the seven big U.S. LNG export plants rose to 12.8 Bft3d so far in August, up from 11.9 Bft3d in July when Freeport shut for nine days for Hurricane Beryl. That compares with a monthly record high of 14.7 Bft3d in December 2023.

 

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