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U.S. natural gas futures slip on record production – Markets

NEW YORK: U.S. natural gas futures fell about 4% to a two-week low on Tuesday on record production and lower-than-expected demand forecasts over the next two weeks.

The price drop came despite a 5% rise in gas prices in Europe due to concerns over Russian supplies and forecasts for temperatures in much of the United States that will remain warmer than normal until at least least mid-August.

So far this summer, power companies have already burned record amounts of gas to meet rising energy consumption to keep air conditioners humming. Electricity demand in Texas is expected to break records again this week.

Gas-fired power plants have supplied more than 40% of U.S. electricity in recent weeks, according to federal energy data, even as gas futures rose about 52% in July. This is partly because coal prices continue to hit new highs, making the use of their coal-fired power plants unprofitable for some producers.

One of the factors that weighed on gas futures for most of the summer was the ongoing shutdown of the Freeport, Texas liquefied natural gas (LNG) export plant, which left more gas in the United States for utilities to inject into currently extremely low inventories.

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 estimated the facility would return to partial service in October. Some analysts say the outage could last longer.

First-month gas futures fell 35.6 cents, or 4.3%, to $7.927 per million British thermal units (mmBtu) at 8:00 a.m. EDT (1200 GMT), putting the contract on the on track for its lowest close since July 19.

So far this year, the first month is up about 112% as much higher prices in Europe and Asia keep demand for U.S. LNG exports strong, especially as the amount of gas from Russia to Europe fell after Moscow invaded Ukraine on February 2. 24. Gas traded around $62 per mmBtu in Europe and $45 in Asia.

The United States became the world’s largest exporter of LNG in the first half of 2022. But regardless of the rise in global gas prices, the United States can no longer export LNG because its plants were already operating at full capacity. 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 – reached 2.5 billion cubic feet per day on Monday from 2.4 bcfd on Sunday.

This compares to an average of 2.8 bcfd in July and 10.4 bcfd in August 2021.

US gas futures are lagging far behind world prices as the US is the world’s largest producer, with all the fuel 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 97.4 billion cubic feet per day in August from a record 96.7 billion cubic feet per day in July.

On a daily basis, however, production was on track to fall 1.4 billion cubic feet per day to a preliminary level of 96.7 billion cubic feet per day on Tuesday after climbing 2.4 billion cubic feet per day to hit a daily record of 98.4 billion cubic feet per day on Friday. Preliminary data is often changed later in the day.

With warmer weather expected, Refinitiv forecast average U.S. gas demand, including exports, to rise from 99.6 billion cubic feet per day this week to 100.2 billion cubic feet per day this week. next week. That forecast was lower than Refinitiv’s outlook on Monday.

The average amount of gas delivered to LNG export plants in the United States rose to 11.1 billion cubic feet per day in August, from 10.9 billion cubic feet per day in July. This compares to a monthly high of 12.9 bcfd in March. The seven major US export plants can transform about 13.8 billion cubic feet per day of gas into LNG.