US natural gas futures eased on Tuesday on forecasts for slightly cooler weather and lower demand over the next two weeks than previously forecast. Front-month gas futures for August delivery on the New York Mercantile Exchange fell 1.2 cents, or 0.5%, to settle at $2.300 per million British thermal units.
Meteorologists predict the weather will remain near normal this week before turning warmer next week - just not as hot as previously forecast. Data provider Refinitiv projected demand in the lower 48 US states would rise from 89.0 billion cubic feet per day (bcfd) this week to 89.8 bcfd next week as power generators burn more gas to meet higher air conditioning use. That is lower than Refinitiv's demand forecasts on Monday of 89.6 bcfd for this week and 91.1 bcfd for next week.
The power sector, however, remains on track to burn more than 40 bcfd of gas on average this month, which would break the monthly record of 39.9 bcfd set in July 2018, according to federal energy projections.
Since Tropical Storm Barry hit the central Louisiana coast on July 13, energy firms have been returning Gulf of Mexico wells and platforms to service.
Gas production from the offshore Gulf of Mexico was expected to rise to 2.6 bcfd on Tuesday from a low of 1.2 bcfd in the July 13-15 period, according to Refinitiv. That compares with a high of 3.1 bcfd during the first week of July.
Despite the gains in the Gulf, output in the Lower 48 states slipped to 89.1 bcfd on Monday due to a decline in Colorado, down from a two-week high of 89.6 bcfd on Sunday, according to Refinitiv. That compares with an all-time daily high of 91.1 bcfd on July 5 and an average of 82.7 bcfd during this week last year.
The amount of gas flowing to the nation's liquefied natural gas (LNG) export terminals edged up to 6.1 bcfd on Monday from 6.0 bcfd on Sunday, according to Refinitiv data. That compares with an all-time high of 6.4 bcfd on Friday.
Analysts said utilities likely added a near-normal 46 billion cubic feet (bcf) of gas into storage during the week ended July 19. That compares with an increase of 27 bcf during the same week last year and a five-year (2014-18) average build of 44 bcf for the period.
If correct, the increase would boost stockpiles to 2.579 trillion cubic feet (tcf), 5.2% below the five-year average of 2.720 tcf for this time of year.
The amount of gas in inventory has remained below the five-year average since September 2017.
It fell as low as 33% below that average in March 2019. With production near record highs, analysts expect stockpiles will reach a near-normal 3.7 tcf by the end of the summer injection season on October 31.
In the spot market, next-day gas for Tuesday at the SoCal Citygate in Southern California jumped by 67% to $3.59 per mmBtu, its highest since mid-June, as a heat wave starts to blanket the region for the rest of the week.
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