Texas markets

U.S. native gas futures rise on lower production, forecast for warmer weather – Markets

NEW YORK: U.S. natural gas futures gained about 3% to a near three-week high on Tuesday on lower daily production and forecasts of warmer weather and of higher demand over the next two weeks than expected.

That heat has already pushed demand for electricity to record highs in several parts of the country, including Texas, and caused electric generators to burn more gas to run air conditioners.

The gas price hike came even as the ongoing outage at the Freeport LNG liquefied natural gas (LNG) export plant in Texas left more gas in the United States for utilities to fill the weak spots. stocks for the winter.

Freeport, the second-largest LNG export plant in the United States, was consuming about 2 billion cubic feet per day (bcfd) of gas before it closed on June 8. Freeport LNG said the facility could return by October. Some analysts, however, believe the plant could remain closed for longer.

First-month gas futures for August delivery rose 15.8 cents, or 2.5%, to $6.584 per million British thermal units (mmBtu) at 9:42 a.m. EDT (1:42 p.m. GMT), putting the contract on track to close at its highest price since June 22.

Recent first-month gains pushed August’s futures premium over September to a record high for the third day in a row.

So far this year, the first month is up about 76% as much higher prices in Europe and Asia keep demand for U.S. LNG exports strong, especially as the invasion of the Ukraine by Russia on February 24 fueled fears that Moscow would cut gas supplies to Europe.

Gas was trading around $51 per mmBtu in Europe and $39 in Asia.

Russian gas exports on the three main lines to Germany – Nord Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route fell drastically. an average of 3.7 bcfd since mid-June to just 1.6 bcfd on Monday with the shutdown of Nord Stream for maintenance.

This is down from around 6.5 billion cubic feet per day in early June and an average of 9.4 billion cubic feet per day in July 2021.

Russian energy company Gazprom PAO expects Nord Stream to return around July 21. Several gas market traders and analysts, however, say the outage could last longer.

US futures are lagging far behind world prices as the US is the world’s largest producer, with all the gas it needs for domestic use, while capacity constraints limit LNG exports.

Data provider Refinitiv said average gas production in the lower 48 U.S. states rose to 96.1 billion cubic feet per day in July from 95.3 billion cubic feet per day in June. This compares to a monthly high of 96.1 bcfd in December 2021.

On a daily basis, however, U.S. production was on course to fall 3.2 billion cubic feet per day to hit a preliminary nearly 11-week low of 93.3 billion cubic feet per day on Tuesday. It would be the largest daily decline since production fell by a record 5.7 billion cubic feet per day in a single day during the February 2021 freeze. Preliminary data is often revised later in the day.

With warmer weather on the way, Refinitiv forecast average U.S. gas demand, including exports, to drop from 98.0 billion cubic feet per day this week to 98.9 billion feet. cubes per day next week. That forecast was higher than Refinitiv’s outlook on Monday.

The average amount of gas flowing to LNG export plants in the United States has fallen to 11.1 billion cubic feet per day so far in July, from 11.2 billion cubic feet per day in June. That was down from 12.5 bcfd in May and a monthly high of 12.9 bcfd in March due to the Freeport outage.

The seven major US export plants can transform about 13.8 billion cubic feet per day of gas into LNG.