US natural gas futures fell to a fresh 38-month low on Monday after production rose to record highs over the weekend and the amount of gas flowing to the nation's liquefied natural gas (LNG) export terminals dropped.

Even though power demand and LNG exports were on track to hit all-time highs this year, analysts said futures have traded near multi-year lows since May because record production and mild spring weather allowed utilities to inject huge amounts of gas into storage, shrinking a massive inventory deficit and removing any concern about shortages in the winter.

The amount of gas in inventory has remained below the five-year average since September 2017. It fell as low as 33% below that average in March 2019. But with production expected to keep growing, analysts said stockpiles should reach a near-normal 3.7 trillion cubic feet (tcf) by the end of the summer injection season on Oct. 31.

Front-month gas futures for September delivery on the New York Mercantile Exchange fell 5.1 cents, or 2.4%, to settle at $2.070 per million British thermal units, their lowest close since May 26, 2016 for a second day in a row.

The drop in the front-month put the contract into oversold territory with a relative strength index (RSI) below 30 and helped drag the 12-month futures strip down to its lowest since March 2016.

In the spot market, gas prices for Monday fell to their lowest in years with Chicago  down to its lowest since May 2016, the Henry Hub benchmark in Louisiana at its lowest since Nov. 2016 and the Algonquin Hub in New England down to its lowest since Nov. 2017.

With no end in sight to the collapse in prices, gas speculators last week boosted their net short positions on the NYMEX and Intercontinental Exchange to the highest on record for a second week in a row, according to US Commodity Futures Trading Commission (CFTC) data from Refinitiv going back to 2010.

Refinitiv said gas production in the Lower 48 US states jumped from a low of 90.8 billion cubic feet per day (bcfd) last week to an all-time high of 91.5 bcfd on Sunday.

Output hit that record even though a section of Enbridge Inc's Texas Eastern pipe in Kentucky remained out of service following an explosion on Thursday, restricting gas flows from the Marcellus and Utica shale to the Gulf Coast.

Enbridge told customers it did not know when the line would return to service. At the time of the explosion, which killed one person, about 1.7 bcfd was moving south through the damaged section of pipe.

Output in the Appalachia region of Pennsylvania, Ohio and West Virginia increased to 32.6 bcfd on Saturday and Sunday from 31.8 bcfd on Thursday after the blast, according to Refinitiv.

The amount of gas flowing to US LNG export terminals, meanwhile, fell from 6.0 bcfd last week to 4.1 bcfd on Sunday due primarily to reductions at Cheniere Energy Inc's facilities at Sabine Pass in Louisiana and Corpus Christi in Texas, according to Refinitiv.

At Sabine Pass, Cheniere said it was conducting planned maintenance on two liquefaction trains - 3 and 4. The company also said there was planned work at the Gillis compressor station from Aug. 5-13 that would reduce capacity on the Creole Trail pipe to as low as 0.8 bcfd for nine days.

The amount of gas flowing on the Creole Trail pipe to Sabine declined to 0.5 bcfd on Sunday from around 1.2 bcfd last week, according to Refinitiv data.

Despite the decline in gas flowing to the LNG export terminals, Refinitiv on Monday forecast demand over the next two weeks would be higher than it forecast on Friday because power generators will likely burn more fuel to meet higher air conditioning use.

On Monday, Refinitiv forecast demand in the Lower 48 states would slide from 91.8 bcfd this week to 90.1 bcfd next week. That compares Friday's estimates of 90.9 bcfd for this week and 89.9 bcfd for next week.

Analysts said utilities likely added a bigger than normal 55 billion cubic feet (bcf) of gas into storage during the week ended August 2. That compares with an injection of 46 bcf during the same week last year and a five-year (2014-18) average build of 43 bcf for the period.

If correct, the increase would boost stockpiles to 2.689 tcf, 4.0% below the five-year average of 2.800 tcf for this time of year.