US natural gas prices drop to 7-week low on rising output, high storage levels | BOE Report (2024)

US natural gas prices drop to 7-week low on rising output, high storage levels | BOE Report (1)U.S. natural gas futures slipped nearly 2% to a seven-week low on Friday, as rising output and ample gas supply in storage outweighed support from forecasts for higher demand over the next two weeks.

Front-month gas futures for May delivery on the New York Mercantile Exchange were down 4.6 cents, or 1.9%, to $2.37 per million British thermal units (mmBtu) at 10:57 a.m. ET (1457 GMT). The contract was heading for its biggest weekly loss since mid-February, down 8.8%.

“Much of the price plunge of the past 3-1/2 weeks has related to an announced production increase by a major U.S. producer that appears to have contributed to a lift in output that has overshadowed the weather factor that still appears tilted in a bullish direction,” energy advisory Ritterbusch and Associates said in a note. It did not identify the producer.

“A broad cool-down across a large chunk of the nation’s mid-continent appears to be weighing on spot pricing with an expected warmup later next week pushed to the sidelines so far as a price motivator.”

Financial company LSEG said gas output in the Lower 48 U.S. states has risen to an average of 102.1 billion cubic feet per day (bcfd) in July.

That was up from an average of 100.2 bcfd in June and a 17-month low of 99.5 bcfd 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 bcfd in December 2023.

With hotter weather expected next week, LSEG forecasts gas demand in the Lower 48 states, including exports, to increase to 106.8 bcfd next week, from 105.9 bcfd this week.

Data from the U.S. Energy Information Administration on Wednesday indicated utilities added 32 billion cubic feet (bcf) of gas into storage during the week ended June 28, in line with analysts’ forecasts in a Reuters poll. That compares with an increase of 76 bcf in the same week last year and a five-year (2019-2023) average rise of 69 bcf for this time of year.

Gas stockpiles were now about 19% above normal for this time of year.

“As the air-conditioning load and the heat for July and August kick in, I think we should eventually see higher prices,” said Thomas Saal, senior vice president for energy at StoneX Financial.

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

Meanwhile, in Europe, gas prices were largely flat with a small rise in demand balanced by Norwegian gas flows, though uncertainty over supplies later in the year offered some support.

Week ended Week ended Year ago Five-year

June 28 June 21 June 28 average

Actual Actual June 28 U.S. weekly natgas storage change (bcf): +32 +57 +76 +69 U.S. total natgas in storage (bcf): 3,134 3,102 2,859 2,638 U.S. total storage versus 5-year average 18.8% 20.7%

Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five-Year

Last Year Average Average

2023 (2018-2022) Henry Hub 2.36 2.43 2.64 2.66 3.60 Title Transfer Facility (TTF) 10.50 10.37 9.58 13.04 14.39 Japan Korea Marker (JKM) 12.42 12.56 11.44 14.39 14.31

LSEG Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days Two-Week Total Forecast Current Day Prior Day Prior Year 10-Year 30-Year

Norm Norm U.S. GFS HDDs 2 2 3 3 4 U.S. GFS CDDs 262 255 226 209 199 U.S. GFS TDDs 264 257 229 212 203

LSEG U.S. Weekly GFS Supply and Demand Forecasts

Prior Week Current Next Week This Week Five-Year

Week Last Year (2019-2023)

Average For

Month U.S. Supply (bcfd) U.S. Lower 48 Dry Production 102 102.1 101.8 103.3 95.5 U.S. Imports from Canada 8.1 7.2 7.0 N/A 7.8 U.S. LNG Imports 0.0 0.0 0.0 0.0 0.1 Total U.S. Supply 110 109.3 108.8 N/A 112.5

U.S. Demand (bcfd) U.S. Exports to Canada 1.7 1.4 1.5 N/A 2.3 U.S. Exports to Mexico 6.6 6.8 6.9 N/A 6.1 U.S. LNG Exports 12.4 13.0 13.0 13.0 8.6 U.S. Commercial 4.3 4.3 4.4 4.3 4.5 U.S. Residential 3.5 3.5 3.6 3.4 3.6 U.S. Power Plant 41.9 47.8 48.4 44.9 43.3 U.S. Industrial 21.6 21.6 21.7 21.2 21.3 U.S. Plant Fuel 5.0 5.0 5.0 4.9 4.9 U.S. Pipe Distribution 2.1 2.3 2.3 2.2 2.2 U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1 Total U.S. Consumption 78.5 84.7 85.5 81.0 79.9 Total U.S. Demand 99.2 105.9 106.8 N/A 96.9

N/A is Not Available

U.S. weekly power generation percent by fuel – EIA

Week ended Week ended Week ended Week ended Week ended

July 5 June 28 June 21 June 14 June 7 Wind 10 9 12 9 11 Solar 6 5 6 6 6 Hydro 6 5 6 7 7 Other 1 1 1 1 1 Petroleum 0 0 0 0 0 Natural Gas 42 43 40 41 41 Coal 17 19 18 16 15 Nuclear 18 17 17 19 19

SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu) Hub Current Day Prior Day Henry Hub 2.02 2.06 Transco Z6 New York 1.44 1.33 PG&E Citygate 2.80 2.83 Eastern Gas (old Dominion South) 1.34 1.34 Chicago Citygate 1.54 1.58 Algonquin Citygate 1.45 1.43 SoCal Citygate 2.04 2.20 Waha Hub 1.89 -2.06 AECO 0.63 0.53

SNL U.S. Power Next-Day Prices ($ per megawatt-hour) Hub Current Day Prior Day New England 28.00 30.50 PJM West 41.00 42.50 Ercot North 31.00 27.25 Mid C 114.67 41.12 Palo Verde 85.50 66.00 SP-15 54.00 58.25

(Reporting by Daksh Grover and Brijesh Patel in Bengaluru; Editing by Rod Nickel)

US natural gas prices drop to 7-week low on rising output, high storage levels | BOE Report (2024)
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