NEW YORK: US natural gas futures dropped about 9% to an 11-week low on Thursday on a bigger-than-expected storage build, as the extended shutdown of the Freeport liquefied natural gas (LNG) export plant in Texas allows utilities to quickly rebuild low gas stockpiles.
Even though the storage build was bigger than expected, it was still smaller than usual for this time of year as extreme heat in several parts of the country last week boosted the amount of gas power generators burned to keep air conditioners humming.
That was especially the case in Texas and the US Southeast where power demand hit record levels this week. The US Energy Information Administration (EIA) said utilities added 74 billion cubic feet (bcf) of gas to storage during the week ended June 17.
That was more than the 65-bcf build analysts forecast in a Reuters poll and compares with an increase of 49 bcf in the same week last year and a five-year (2017-2021) average increase of 82 bcf.
Last week’s increase boosted stockpiles to 2.169 trillion cubic feet (tcf), or 13.2% below the five-year average of 2.500 tcf for this time of the year.
The Freeport shutdown on June 8 reduced the amount of US gas available to the rest of the world, especially in Europe where most US LNG has gone as countries there wean themselves off Russian energy after Moscow invaded Ukraine in February.
Analysts said leaving more gas in the United States, however, should give American utilities a chance to rebuild extremely low stockpiles quickly. Freeport, the second-biggest US LNG export plant, consumes about 2 billion cubic feet per day (bcfd) of gas, so a 90-day shutdown would make about 180 billion cubic feet (bcf) of additional gas available to the US market. Front-month gas futures for July delivery on the New York Mercantile Exchange (NYMEX) were down 62.7 cents, or 9.1%, to $6.231 per million British thermal units (mmBtu) at 10:47 a.m EDT (1447 GMT), putting the contract on track to close at its lowest level since April 6.
That kept the front-month in technically oversold territory, with a relative strength index (RSI) below 30 for a fourth straight day for the first time since September 2020.
With the Federal Reserve expected to keep raising interest rates, open interest in NYMEX futures fell on Wednesday to its lowest level since August 2016 for a second day in a row as investors continued to cut back on risky assets.
Despite recent declines, US gas futures are still up about 68% so far this year as much higher prices in Europe and Asia keep demand for US LNG exports strong, especially since Russia’s Feb. 24 invasion of Ukraine stoked fears Moscow might cut gas supplies to Europe.
Gas was trading around $41 per mmBtu in Europe and $37 in Asia. Gas prices at the Title Transfer Facility (TTF) in the Netherlands, the European benchmark, were up 6% after Germany entered Phase 2 of its three-stage emergency gas plan due to reduced supply from Russia.
Russia kept pipeline exports to Europe low at 3.7 bcfd on Wednesday, the same as on Tuesday, on the three mainlines into Germany: North Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route. That compares with an average of 11.6 bcfd in June 2021.
Data provider Refinitiv said the amount of gas flowing to US LNG export plants has fallen from an average of 12.5 bcfd in May to 11.3 bcfd so far in June due to the Freeport outage. That compares with a monthly record of 12.9 bcfd in March. The seven big US export plants can turn about 13.6 bcfd of gas into LNG.
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