August 08 -- U.S. natural gas futures eased about 1% on Friday, with output holding near record highs and forecasts for less hot weather and lower demand over the next two weeks than previously expected.
Also weighing on prices was the ongoing outage at the Freeport liquefied natural gas (LNG) export plant in Texas, which has left more gas in the United States for utilities to rebuild extremely low stockpiles for next winter.
That price decline came despite forecasts for the weather to remain hotter than normal through at least mid August, prompting power generators to keep burning record amounts of gas to keep air conditioners humming.
Gas-fired plants have provided more than 40% of U.S. power in recent weeks, according to federal energy data, even though gas futures soared about 52% in July. That is partly because coal prices keep hitting record highs, making it uneconomical for some generators to use their coal plants.
Freeport is the second-biggest LNG export plant in the United States. It was consuming about 2 billion cubic feet per day (bcfd) of gas before it shut on June 8. Freeport expects to return the facility to at least partial service in early October.
Front-month gas futures fell 9.2 cents, or 1.1%, to $8.030 per million British thermal units (mmBtu) at 9:09 a.m. EDT (1309 GMT).
For the week, the contract was on track to slide about 3% after easing about 1% last week.29dk2902l
So far this year, the front-month was up about 115%, as much higher prices in Europe and Asia keep demand for U.S. LNG exports strong, especially since the amount of gas from Russia to Europe has dropped following Moscow’s invasion of Ukraine on Feb. 24.
Gas was trading around $58 per mmBtu in Europe and $45 in Asia.
The United States became the world’s top LNG exporter during the first half of 2022. But no matter how high global gas prices rise, the United States cannot export any more LNG because its plants were already operating at full capacity.
Russian gas exports on the three main lines into Germany – Nord Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route – held at 2.5 bcfd on Thursday, the same as Wednesday. That compares with an average of 2.8 bcfd in July and 10.4 bcfd in August 2021.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 97.8 bcfd so far in August from a record 96.7 bcfd in July.
With hotter weather expected, Refinitiv projected that average U.S. gas demand including exports would rise from 98.9 bcfd this week to 100.8 bcfd next week before sliding to 99.2 bcfd in two weeks as the heat starts to ease. The forecasts for this week and next were lower than Refinitiv’s outlook on Thursday.
The average amount of gas flowing to U.S. LNG export plants rose to 11.0 bcfd so far in August from 10.9 bcfd in July. That compares with a monthly record of 12.9 bcfd in March. The seven big U.S. export plants can turn about 13.8 bcfd of gas into LNG.
The reduction in U.S. exports from Freeport is a problem for Europe where most U.S. LNG has gone as countries there wean themselves off Russian energy.
Gas stockpiles in Northwest Europe – Belgium, France, Germany and the Netherlands – were about 5% below the five-year (2017-2021) average for this time of year, according to Refinitiv. Storage was currently about 66% of capacity.
That is much healthier than U.S. inventories, which were about 12%, below their five-year norm.