NEW YORT: US natural gas futures gained about 4% to a 17-week high on Friday on a daily rise in the amount of gas flowing to liquefied natural gas (LNG) export plants, amid signs of lower US inflation and forecasts for hotter-than-normal US weather to continue through mid-July, especially in Texas.
In Texas, power use remained high after setting a record on Tuesday as a heat wave continues to bake the state, according to the state’s grid operator, the Electric Reliability Council of Texas (ERCOT).
Extreme heat boosts the amount of gas generators burn to produce power for air conditioning, especially in Texas, which gets most of its electricity from gas-fired plants. In 2022, about 49% of the state’s power came from gas-fired plants, with most of the rest from wind (22%), coal (16%), nuclear (8%) and solar (4%), according to federal energy data.
“A major factor at play today is the release of new inflation data suggesting that the (US) Federal Reserve (Fed) may be less inclined to continue rate hikes than previously expected,” analysts at energy consulting firm Gelber and Associates said, noting the rally began at 8:30 a.m. EDT (1230 GMT) after the US Commerce Department released personal income data for May.
The Commerce Department’s report showed annual inflation rising last month at its slowest pace in more than two years. Signs of lower inflation could delay interest rate hikes by the Fed. Higher interest rates increase borrowing costs, which can slow the economy and reduce demand for energy.
Front-month gas futures for August delivery on the New York Mercantile Exchange rose 9.7 cents, or 3.6%, to settle at $2.798 per million British thermal units, their highest close since March 3.For the week, the US contract was up about 3%, putting it up for a fourth week in a row for the first time since April 2022.
For the month, the US contract was up about 23% after falling about 6% in May.
For the quarter, the US contract was up about 26% after dropping by a record 50% in the first quarter.
Data provider Refinitiv said average gas output in the US Lower 48 states fell to 101.5 billion cubic feet per day (bcfd) so far in June from a record 102.5 bcfd in May.
On a daily basis, however, output was on track to rise 1.8 bcfd over the past three days to a preliminary two-week high of 102.0 bcfd on Friday.
Meteorologists forecast the weather in the Lower 48 states would remain hotter-than-normal through at least July 15.
Refinitiv forecast US gas demand, including exports, would rise from 97.9 bcfd this week to 104.2 bcfd next week as the weather turns hotter, before easing to 103.6 bcfd in two weeks as temperatures moderate a bit. The forecasts for this week and next were similar to Refinitiv’s outlook on Thursday.
Gas flows to the seven big US LNG export plants fell to an average of 11.6 bcfd so far in June from 13.0 bcfd in May. That is well below the monthly record high of 14.0 bcfd in April due to maintenance at several facilities, including Cheniere Energy Inc’s Sabine Pass in Louisiana and Corpus Christi in Texas.
On a daily basis, however, total feedgas to the seven LNG export facilities rose to a four-week high of 12.8 bcfd on Wednesday as the amount of gas flowing to Sabine jumped about 2 bcfd over the past week to around 4.3 bcfd. That compares with average feedgas to Sabine of 4.5 bcfd so far this year and 4.5 bcfd in all of 2022.