US natural gas futures steady ahead of weekly storage report

US natural gas futures were little changed on Thursday as the market waited for direction from a federal report expected to show a bigger-than-usual storage build with output at its highest level for this time of year.

Traders noted, however, that average output in 2021 was still expected to be down from 2019's 93.1-billion cubic feet per day (bcfd) record after prices and production collapsed in 2020 due to coronavirus demand destruction.

Analysts forecast US utilities added 43 billion cubic feet (bcf) of gas into storage during the week ended July 23. That compares with an increase of 27 bcf in the same week last year and a five-year (2016-2020) average increase of 28 bcf.

If correct, last week's injection would boost stockpiles to 2.721 trillion cubic feet (tcf), or 5.6% below the five-year average of 2.882 tcf for this time of year.

US natgas futures ease from 31-month high

On their first day as the front-month, gas futures for September delivery fell 1.1 cents, or 0.3%, from where they closed on Wednesday to $3.956 per million British thermal units (mmBtu) at 8:00 a.m. EDT (1200 GMT).

That put the contract down about 2% from where the August future closed on Wednesday when it was still the front month and on track for its lowest settle since July 21.

In the power market, West Cost prices soared as homes and businesses crank up their air conditioners to escape another heat wave, which prompted the California grid operator to urge consumers to conserve energy on Wednesday.

The California ISO, grid operator for most of the state, has not asked for conservation on Thursday even though peak power demand was expected to be higher than on Wednesday.

In Texas, meanwhile, the Electric Reliability Council of Texas (ERCOT), grid operator for most of the state, projected less hot weather forecasts for the next week will keep electric demand below Monday's 72,856 megawatt peak, which was the highest seen so far this year.

Asia's naphtha crack eases; YNCC, Mitsui buy H1 Sept cargoes

Data provider Refinitiv said gas output in the US Lower 48 states slipped to 91.6 bcfd so far in July, due mostly to pipeline problems in West Virginia early in the month. That would still be the most production seen during the month of July but was lower than June's 92.2-bcfd average and the all-time high of 95.4 bcfd in November 2019.

Refinitiv projected average gas demand, including exports, would drop from 95.7 bcfd this week to 91.9 next week on expectations for less heat and air-conditioning demand. The forecast for next week was higher than Refinitiv predicted on Wednesday.

The amount of gas flowing to US LNG export plants averaged 10.8 bcfd so far in July, up from 10.1 bcfd in June but still below April's 11.5-bcfd record.

With European and Asian gas trading near $14 and $15 per mmBtu, respectively, analysts said buyers around the world would keep purchasing all the LNG the United States can produce. Prices at the Title Transfer Facility (TTF) in the Netherlands, the European benchmark, rose to their highest level since October 2008.

US pipeline exports to Mexico have averaged 6.6 bcfd so far in July, down from a record 6.8 bcfd in June.