NEW YORK: US natural gas futures slipped on Wednesday from a two-month high in the prior session on a forecast small decline in cooling demand next week, a continued drop in liquefied natural gas (LNG) exports and a smaller than expected drop in output due to unplanned pipeline work.

Front-month gas futures fell 5.2 cents, or 2.8%, to settle at $1.824 per million British thermal units. On Tuesday, the contract closed at its highest since May 7.

Looking ahead, futures for the balance of 2020 and calendar 2021 were trading about 22% and 43%, respectively, over the front-month, on hopes energy demand will rise.

Refinitiv said production in the Lower 48 US states averaged 88.2 billion cubic feet per day (bcfd) so far in July, up from a 20-month low of 87.0 bcfd in June but still well below the all-time monthly high of 95.4 bcfd in November.

US gas production on Wednesday was on track to drop to its lowest since mid June following revisions of pipeline flows on Tuesday due to unplanned work on TC Energy Corp's Mountaineer Xpress pipeline in West Virginia that will continue through at least July 13. On Tuesday, early pipeline flow data showed output was expected to drop by a record 4.2 bcfd. In reality, however, output fell by just 1.9 bcfd, which is still high but only the most in a day since May 1.

As the weather heats up, Refinitiv forecasts US demand, including exports, will rise from 89.1 bcfd this week to 91.0 bcfd next week. The outlook for next week is a little lower than Refinitiv expected on Tuesday.

Pipeline gas flowing to US LNG export plants averaged just 3.1 bcfd (32% utilization) so far in July, down from a 20-month low of 4.1 bcfd in June and a record high of 8.7 bcfd in February. Utilization was about 90% in 2019.