NEW YORK: US natural gas futures eased about 1% to a four-month low on Wednesday on forecasts for less hot weather over the next two weeks than previously expected, which should cut the amount of gas power generators need to burn to keep air conditioners humming.
Energy analysts also noted the tremendous oversupply of gas in storage for this time of year has kept a lid on prices all year.
There was still about 12% more gas in storage than normal even though weekly builds, including a rare decline during one week in August, have been smaller than normal in 13 of the past 14 weeks.
On its last day as the front-month, gas futures for September delivery on the New York Mercantile Exchange fell 2.4 cents, or 1.3%, to $1.880 per million British thermal units (mmBtu) at 9:28 a.m. EDT (1328 GMT), putting the contract on track for its lowest close since April 26 for a second day in a row.
That also put the contract to fall a seventh day in a row for the first time since February, dropping about 16% during that time, and kept the front-month in technically oversold territory for a second day in a row for the first time since July. Futures for October, which will soon be the front-month, were down about 1.8% to $2.05 per mmBtu.
In the spot market, pipeline constraints caused next-day gas prices at the Waha hub in the Permian Shale in West Texas to average in negative territory again for a record 30th time this year.
Waha prices first averaged below zero in 2019. It happened 17 times in 2019, six in 2020 and once in 2023.
Producers increase and decrease output in reaction to prices, but it usually takes a few months for changes in drilling activity to show up in the production data.
Average monthly spot prices at the US Henry Hub benchmark in Louisiana hit a 12-month high of $3.18 per mmBtu in January before dropping to a 44-month low of $1.72 in February and a 32-year low of $1.49 in March, according to Reuters and federal energy data.
In reaction to that price plunge, producers cut average monthly output from 106.0 billion cubic feet per day (bcfd) in February to 102.7 bcfd in March, 101.5 bcfd in April, and a 17-month low of 101.3 bcfd in May, according to federal energy data.
As monthly Henry Hub spot prices increased to $1.60 per mmBtu in April, $2.12 in May, and $2.54 in June, some producers, including EQT and Chesapeake Energy, started to increase drilling activities, boosting output to 101.0 bcfd in June and 103.4 bcfd in July.
But with average spot Henry Hub prices back down to $2.08 per mmBtu in July and $2.01 so far in August, analysts said output would likely decline in coming months as some producers reduce drilling activities again.
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