US natgas prices ease on big storage build, low flows to LNG export plants

By Scott DiSavino

June 5 (Reuters) - U.S. natural gas futures eased about 1% on Thursday on a bigger-than-expected storage build and lower gas flows to liquefied natural gas export plants over the past month or so.

That price decline came despite weeks of lower output and forecasts for more demand over the next two weeks than previously expected.

Gas futures NGc1 for July delivery on the New York Mercantile Exchange fell 3.9 cents, or 1.0%, to settle at $3.677 per million British thermal units.

The U.S. Energy Information Administration said energy firms added 122 billion cubic feet of gas into storage during the week ended May 30, which boosted total inventories to around 5% above the five-year (2020-2024) average.

The increase also hit a lot of milestones. It was the biggest weekly storage build since October 2022, according to EIA data, and was the seventh week in a row that energy firms added more gas into storage than usual. It was also the first time weekly injections topped 100 bcf for six weeks in a row since June 2019.

Another factor keeping pressure on futures prices in recent weeks has been low cash prices. Next-day prices at the U.S. Henry Hub benchmark NG-W-HH-SNL in Louisiana were around $2.80 per mmBtu. Spot contracts have traded below front-month futures every day since late April.

Analysts have said that so long as spot prices remain far enough below front-month futures NGc1 to cover margin and storage costs, traders should be able to lock in arbitrage profits by buying spot gas, storing it and selling a futures contract.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 U.S. states fell to 104.1 billion cubic feet per day so far in June, down from 105.2 bcfd in May and a monthly record high of 106.3 bcfd in March.

Energy traders said output reductions over the past month or so were primarily due to normal spring maintenance on gas pipelines. Energy firms usually work on gas pipes and other equipment in the spring and autumn when demand for the fuel for heating and cooling is low.

LSEG forecast average gas demand in the Lower 48, including exports, will rise from 95.5 bcfd this week to 97.7 bcfd next week. Those forecasts were higher than LSEG's outlook on Wednesday.

The average amount of gas flowing to the eight big U.S. LNG export plants fell to 13.5 bcfd so far in June, down from 15.0 bcfd in May and a monthly record high of 16.0 bcfd in April.

Traders said LNG feedgas reductions since April were primarily due to normal spring maintenance, including work at Cameron LNG's 2.0-bcfd plant in Louisiana and Cheniere Energy's LNG.N 4.5-bcfd Sabine Pass facility in Louisiana and 3.9-bcfd Corpus Christi plant in Texas, and short, unplanned unit outages at Freeport LNG's 2.1-bcfd plant in Texas on May 6, May 23, May 28 and June 3.

Energy traders have noted that LNG maintenance would likely continue through early- to mid-June at Cameron and late-June at Sabine. Analysts said prices could spike higher in late June when demand for gas rises as those LNG plants return to full service and power generators start burning more gas to meet higher summer air conditioning demand.

For gas data on the LSEG terminal type ENERGY in the search bar and then go to the GAS drop down and the NORTH AMERICA drop down.

For Interactive Map, type 'Interactive Map' in the box at upper left of the LSEG terminal

For graphics on Baker Hughes rig counts, see: http://graphics.thomsonreuters.com/15/rigcount/index.html

For next-day SNL U.S. gas prices, see: 0#SNL-NG

For next-day SNL U.S. power prices, see: 0#SNL-PWR

For U.S. natgas price and storage polls, see: NGAS/POLL

For U.S. nuclear power outages, see: NUKE/

For U.S. Northwest hydro power report, see: NWRFC

For U.S./Canada natural gas rig count vs Henry Hub futures price, see: http://tmsnrt.rs/2eT9k44

For the U.S. natural gas speed guide, see: USGAS

For the U.S. power speed guide, see: USPOWER

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