US natural gas futures fell to their lowest in a week on Monday on forecasts for cooler weather and less demand over the next two weeks than previously expected. Front-month gas futures for August delivery on the New York Mercantile Exchange fell 4.1 cents, or 1.8%, to settle at $2.267 per million British thermal units, their lowest close since June 21.
That puts the contract within a dime of its June 20 close at $2.185 per mmBtu, its lowest settlement since May 27, 2016. Traders noted the front-month has held close to multi-year lows since the end of May as near-record production and moderate weather allowed utilities to inject huge amounts of gas into stockpiles, shrinking a massive storage deficit and removing any concerns about shortages next winter.
The amount of gas in storage has remained below the five-year average since September 2017. It peaked at 33% under the five-year average in March 2019. Analysts forecast inventories will reach a near-normal 3.7 trillion cubic feet (tcf) by the end of the summer injection season at the end of October.
Output in the Lower 48 US states rose to 90.2 billion cubic feet per day (bcfd) on Sunday from a low of 89.5 bcfd last week, according to data provider Refinitiv. That compares with an all-time daily high of 90.5 bcfd on March 29 and an average of 82.8 bcfd during this week last year.
With the weather expected to be cooler over the next two weeks than previously forecast, Refinitiv projected demand in the Lower 48 states would reach only 86.5 bcfd this week and 89.1 bcfd next week as power generators burn more gas to keep air conditioners humming. That is lower than Refinitiv's forecasts on Friday of 87.9 bcfd for this week and 89.3 bcfd next week.
Those demand forecasts included projections gas exports via pipeline to Mexico and liquefied natural gas (LNG) to the world would remain unchanged over the next two weeks. Last week, Refinitiv forecast both pipeline and LNG exports would rise.
In Mexico, flows on the Valley Crossing line from Texas, which were expected to start in June, were delayed by an arbitration case in Mexico over pipeline costs.
LNG exports, meanwhile, rose to a record high of 6.2 bcfd last week but were not expected to return to those lofty levels over the next couple of weeks.
LNG exports hit record highs last week as new units prepare to enter service at several terminals, including Cheniere Energy Inc's Corpus Christi, Sempra Energy's Cameron in Louisiana, Freeport LNG's Freeport in Texas and Kinder Morgan Inc's Elba in Georgia. Most of those units, however, have remained in test mode for weeks.
Analysts said when those new units do enter service, they will add to the current global LNG glut.
Traders said they would not be surprised to see LNG buyers start to reject some US cargoes with gas prices at or near multi-year lows in Europe and Asia.
Gas at the Title Transfer Facility or TTF in the Netherlands climbed to $3.45 per mmBtu on Monday from a record low of $3.13 on Friday as a brutal heat wave blankets parts of Europe and power generators burn more gas to meet rising air conditioner use, according to Refinitiv data going back to 2005. In the United States, analysts said utilities likely added 84 billion cubic feet (bcf) of gas to inventories during the week ended June 28.
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