NEW YORK: US natural gas futures dropped more than 3% to a one-week low on Friday on forecasts for less hot weather than previously expected and oversupply of gas in storage, even though a federal weekly report showed a surprise draw in inventories this week.
Front-month gas futures for September delivery on the New York Mercantile Exchange were down 7.4 cents, or about 3.4%, to settle at $2.123 per million British thermal units.
“Prices are mainly down because of the high levels of gas in storage and high production volumes. Lowered demand from LNG maintenance has also allowed storage to stay so high,” said Ryan Parsons, an analyst at energy consulting firm Gelber and Associates.
However, “we are bullish on market prices through the end of 2024,” Parsons added.
The US Energy Information Administration on Thursday said utilities drew 6 billion cubic feet (bcf) of gas from inventories during the week ended Aug. 9, decreasing stockpiles to 3.264 trillion cubic feet (tcf). However, that was still above 7.2% the same week a year ago and 12.5% above the five-year average for the week.
Financial firm LSEG estimated 223 cooling degree days (CDDs) over the next two weeks, slightly lower than the 227 CDDs estimated on Thursday. The normal for this time of year is 186 CDDs.
LSEG forecast average gas demand in the Lower 48 US states, including exports, to rise from 104.4 billion cubic feet per day (bcfd) this week to 106.5 bcfd next week.
LSEG said gas output in the Lower 48 US has fallen to an average of 102.4 bcfd so far in August, down from 103.4 bcfd in July. That compares with a monthly record high of 105.5 bcfd in December 2023.
“This market is sending off some bearish vibes given its inability to advance off of a seemingly bullish EIA report that offered a highly unusual 6 bcf storage withdrawal for early August,” energy advisory firm Ritterbusch and Associates said in a note.
“The decline reduced the surplus by almost 50 bcf to around 375 bcf and we expect a further reduction in the supply overhang during the next couple of months as the injection cycle winds down”
Meanwhile, Dutch and British gas wholesale prices were mixed on Friday morning as strong storage inventories helped ease fears of potential supply disruptions due to the war between Russia and Ukraine as well as tensions in the Middle East.