NEW YORK: US natural gas futures slid about 3% to a two-week low on Thursday on forecasts for less hot weather over the next two weeks that should reduce the amount of gas electric power generators burn to keep air conditioners humming.
That price decline came ahead of a federal report expected to show last week’s build was smaller than normal for a 13th time in the past 14 weeks, including the rare summer withdrawal during the week ended Aug. 9. That withdrawal was the first weekly decline in August since 2006.
Analysts forecast US utilities added 29 billion cubic feet (bcf) of gas into storage during the week ended Aug. 16. That compares with an increase of 23 bcf in the same week last year and a five-year (2019-2023) average rise of 41 bcf for this time of year.
If correct, that will leave gas stocks about 12% above normal for this time of year.
Front-month gas futures for September delivery on the New York Mercantile Exchange fell 6.7 cents, or 3.1%, to $2.110 per million British thermal units (mmBtu) at 9:03 a.m. EDT (1303 GMT), putting the contract on track for its lowest close since Aug. 6.
In the spot market, pipeline constraints caused next-day gas prices at the Waha hub in the Permian Shale in West Texas to average in negative territory again for a record 28th time this year.
Waha prices first averaged below zero in 2019. It happened 17 times in 2019, six in 2020 and once in 2023.
Producers increase and decrease output in reaction to prices, but it usually takes a few months for changes in drilling activity to show up in the production data.
Average monthly spot prices at the US Henry Hub benchmark in Louisiana hit a 12-month high of $3.18 per mmBtu in January before dropping to a 44-month low of $1.72 in February and a 32-year low of $1.49 in March, according to Reuters and federal energy data.
In reaction to that price plunge, producers cut average monthly output from 106.0 billion cubic feet per day (bcfd) in February to 102.7 bcfd in March, 101.5 bcfd in April and a 17-month low of 101.3 bcfd in May, according to federal energy data.
Winter storms at the start of the year caused output to fall from a record 106.3 bcfd in December to 103.6 bcfd in January.
As monthly spot Henry Hub prices increased to $1.60 per mmBtu in April, $2.12 in May and $2.54 in June, some producers, including EQT and Chesapeake Energy, started to increase drilling activities, boosting output to 101.0 bcfd in June and 103.4 bcfd in July.
But with average spot Henry Hub prices back down to $2.08 per mmBtu in July and $2.02 so far in August, analysts said output would likely decline as some producers reduce drilling activities again.
Financial firm LSEG said gas output in the US Lower 48 US states has slid to an average of 102.3 bcfd so far in August, down from 103.4 bcfd in July.
LSEG forecast average gas demand in the Lower 48, including exports, will rise from 103.7 bcfd this week to 103.9 bcfd next week. Those forecasts were lower than LSEG’s outlook on Wednesday.
Gas flows to the seven big US LNG export plants rose to 12.9 bcfd so far in August, up from 11.9 bcfd in July. That compares with a monthly record high of 14.7 bcfd in December 2023.