NEW YORK: US natural gas futures slid about 2% to a two-week low on Friday on forecasts for lower demand this week than previously expected.

Energy analysts also noted that the oversupply of gas in storage has kept a lid on gas prices all year.

There was still about 12% more gas in storage than normal for this time of year even though weekly builds, including a rare decline during one week in August, have been smaller than normal in 13 of the past 14 weeks.

That price decline came despite forecasts for hotter-than-normal weather over the next two weeks that should prompt power generators to burn more gas to keep air conditioners humming into early September.

Front-month gas futures for September delivery on the New York Mercantile Exchange fell 3.1 cents, or 1.5%, to settle at $2.022 per million British thermal units (mmBtu), their lowest close since Aug. 6 for a second day in a row.

With the contract down for four days in a row, the front-month dropped about 5% this week after easing about 1% last week.

In Canada, next-day gas prices at the AECO hub in Alberta fell to 20 cents per mmBtu, their lowest since hitting a record low of around 2 cents in August 2022, according to pricing data from financial firm LSEG going back to 1993.

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 slid to an average of 102.3 bcfd so far in August, down from 103.4 bcfd in July.

Meteorologists forecast weather across the country would remain mostly hotter than normal through Sept. 7.

LSEG forecast average gas demand in the Lower 48, including exports, will rise from 101.2 bcfd this week to 103.9 bcfd next week before sliding to 103.3 bcfd in two weeks. The forecast for this week was lower than LSEG’s outlook on Thursday.