US natural gas futures eased on Tuesday from the prior session's five-month high as gas followed the oil market lower after Saudi Arabia said it has fully restored it oil production. On Monday, oil futures jumped almost 15% following a weekend attack on Saudi oil facilities that halved the kingdom's production. After the Saudi statement on Tuesday, crude futures dropped around 6%.
In addition to the oil market moves, some analysts noted gas demand could decline as Tropical Storm Imelda moves over Houston over the next 24 hours. Front-month gas futures for October delivery on the New York Mercantile Exchange fell 1.3 cents, or 0.5%, to settle at $2.668 per million British thermal units (mmBtu). On Monday, the contract closed at its highest since April 10.
The contract started to decline on Tuesday after rising to within a penny of but failing to break above the 200-day moving average, a key point of technical resistance. The front-month has traded below the 200-day average since January. Despite the decline, the front-month remained up more than 31% over a recent three-year low of $2.029 per mmBtu on Aug. 5, keeping it in overbought territory for an 11th consecutive day for the first time since December 2016.
Even though temperatures were forecast to remain at above-normal levels over much of the country through the end of September, analysts noted the weather was still expected to cool a bit with the coming of autumn. Data provider Refinitiv projected demand in the lower 48 US states would slip to 82.4 billion cubic feet per day (bcfd) next week from 85.2 bcfd this week as power generators burn less fuel as consumers turn down their air conditioners.
US gas exports, meanwhile, were expected to rise fast over the next two weeks.
Gas flows to US liquefied natural gas (LNG) export plants rose to a two-week high of 6.7 bcfd on Monday after Train 5 at Cheniere Energy Inc's Sabine Pass terminal in Louisiana returned to service from planned maintenance, up from an average of 6.1 bcfd last week, according to Refinitiv data.
In two weeks, Refinitiv projected, flows to US LNG terminals could rise to a record 7.0 bcfd.
Exports to Mexico, meanwhile, held around 5.1 bcfd over the past two weeks as the market continued to wait for the startup of the 2.6-bcfd Valley Crossing and Sur de Texas-Tuxpan pipes after TC Energy Corp and Sempra's IENOVA unit resolved pipeline contract disputes with Mexico's Federal Electricity Commision in late August.
In preliminary pipeline data, Refinitiv said flows through the Brownsville point in Texas, which the market uses to watch gas moving through the Valley Crossing pipe, jumped to over 0.6 bcfd on Tuesday from zero on Monday.
Gas production in the lower 48 states rose to 92.6 bcfd on Monday, up from an average of 91.7 bcfd last week, according to Refinitiv data. That compares with an all-time daily high of 93.0 bcfd on August 19.
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