US natgas prices drop 4% to 4-week low on storage builds, rising output

By Scott DiSavino

June 26 (Reuters) - U.S. natural gas futures dropped about 4% to a four-week low on Thursday on a bigger-than-expected weekly storage build and a rise in output so far this month.

On their last day as the front-month, gas futures for July delivery NGc1 on the New York Mercantile Exchange fell 14.5 cents, or 4.3%, to settle at $3.261 per million British thermal units (mmBtu), their lowest close since May 28 for a second day in a row.

That decline put the front-month down for a fifth day in a row for the first time since August 2024.

The August NGQ25 futures, which will now be the front-month, were trading down about 1% to $3.52 per mmBtu.

The U.S. Energy Information Administration (EIA) said energy firms added 96 billion cubic feet (bcf) of gas into storage during the week ended June 20, marking the 10th week in a row that storage builds were bigger than the five-year normal for this time of year.

That was more than the 88-bcf build analysts forecast in a Reuters poll and compares with an increase of 59 bcf during the same week last year and an average increase of 79 bcf over the past five years (2020-2024). EIA/GAS NGAS/POLL

Even though meteorologists forecast the weather will remain hotter than normal for at least the next two weeks, temperatures were not expected to return to the highs seen during this week's heat wave.

Tuesday was the hottest day in more than a decade for millions of residents across the U.S. Northeast, weather forecaster AccuWeather reported, noting temperatures in Philadelphia and Boston hit 100 degrees Fahrenheit (37.8 Celsius), while New York City broke the record high from an 1888 heat wave.

To escape that heat, homes and businesses cranked up air conditioners, boosting power prices to their highest since January in some markets and stressing regional power grids.

Even though power generators burn more gas during heat waves to produce electricity to keep those air conditioners humming, gas prices have dropped about 21% since hitting an 11-week high of around $4.15 per mmBtu on June 20.

With futures for the rest of the summer trading well below last week's high, with July NGN25 closing at $3.26 per mmBtu and August NGQ25 at $3.52, some analysts have started to say the market may have already seen its highest price for the summer on June 20.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 U.S. states rose to 105.5 billion cubic feet per day in June, up from 105.2 bcfd in May, but still below the monthly record high of 106.3 bcfd in March due primarily to normal spring pipeline maintenance earlier in the month.

With more high summer temperatures still to come, LSEG forecast average gas demand in the Lower 48, including exports, would rise from 103.7 bcfd this week to 106.0 bcfd next week.

The forecast for next week was higher than LSEG's outlook on Wednesday.

The average amount of gas flowing to the eight big U.S. LNG export plants fell to 14.1 bcfd in June, down from 15.0 bcfd in May and a monthly record high of 16.0 bcfd in April.

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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