NEW YORK: US natural gas futures extended losses to a near one-week low on Wednesday, weighed down by forecasts for lower demand over the next two weeks than previously expected and rising output.
The price drop came despite forecasts for hotter than normal weather continuing through mid-August, especially in Texas.
Front-month gas futures for September delivery on the New York Mercantile Exchange settled 8.3 cents, or 3.2%, lower at $2.477 per million British thermal units (mmBtu).
“Even with the record high temperatures and record power generation demand, the market fails to rally because we’ve seen some very strong production numbers here in the US,” said Phil Flynn, an analyst at Price Futures Group.
“We’re going to be locked in the $0.20 range and there’s limited downside from here and a little bit more upside though we’re not looking for a major move in either direction,” Flynn added.
Demand for power in Texas hit a record high on Tuesday for the second day in a row, and will likely break that high on Wednesday and next week as homes and businesses keep their air conditioners cranked up to escape a lingering heat wave, according to forecasts by the Electric Reliability Council of Texas (ERCOT), the state’s power grid operator. Extreme heat boosts the amount of gas burned to produce power for cooling, 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 coming from wind (22%), coal (16%), nuclear (8%) and solar (4%), federal energy data showed.
That Texas record came a few days after overall US power demand hit its highest so far this year (and second highest ever) on July 27 - the hottest day this summer, according to data from the US Energy Information Administration (EIA) going back to 2016.
EIA said power use hit 14.7 million megawatt hours (MWh) on July 27, just shy of the 14.8-million MWh record on July 20, 2022. Data provider Refinitiv said temperatures in the US Lower 48 states averaged 82.2 degrees Fahrenheit (27.9 Celsius) on July 27, a little short of the record 83.0 F on July 20, 2022, according to data going back to 2018.