US natgas prices ease on less hot forecasts, lower demand

By Scott DiSavino

July 15 (Reuters) - U.S. natural gas futures eased on Tuesday on forecasts for less hot weather over the next two weeks than previously expected that should reduce demand for the fuel.

Front-month gas futures for August delivery NGc1 on the New York Mercantile Exchange fell 2.3 cents, or 0.7%, to $3.443 per million British thermal units. On Monday, the contract closed at its highest since July 2.

The U.S. National Hurricane Center said a tropical system off the east coast of Florida has about a 40% chance of strengthening into a tropical cyclone over the next week as it moves west into the Gulf of Mexico off Louisiana, Mississippi, Alabama and Florida.

Analysts have noted that tropical storms in the Gulf can knock some production out of service, but noted that only about 2% of all U.S. gas output comes from the federal offshore Gulf of Mexico.

The analysts said storms were more likely to be demand-destroying events that can reduce the amount of gas power generators burn by leaving millions of homes and businesses without electricity and cutting gas exports by shutting Gulf Coast LNG export plants.

Meteorologists forecast the weather would mostly remain hotter than normal through at least July 30, but not as hot as previously expected.

Even though the weather has remained above normal so far this summer, analysts expect energy firms to keep injecting more gas into storage than usual in coming weeks. That is because output hit a record high in June and was on track to top that in July, while gas flows to LNG export plants have so far languished since hitting a record in April.

There is currently about 6% more gas in storage than the five-year (2020-2024) normal for this time of year, and analysts expect that surplus to grow in coming weeks. Some analysts, however, noted that an expected rise in LNG exports should start to chip away at that surplus later this year. EIA/GAS NGAS/POLL

SUPPLY AND DEMAND

LSEG said average gas output in the Lower 48 rose to 106.9 billion cubic feet per day so far in July, up from a monthly record high of 106.4 bcfd in June.

LSEG forecast average gas demand in the Lower 48, including exports, would slide from 107.8 bcfd this week to 106.8 bcfd next week. Those forecasts were lower than LSEG's outlook on Friday.

The average amount of gas flowing to the eight big U.S. LNG export plants rose to 15.8 bcfd so far in July as liquefaction units at some plants slowly exited maintenance reductions and unexpected outages. That was up from 14.3 bcfd in June and 15.0 bcfd in May, but remained below the monthly record high of 16.0 bcfd in April.

The U.S. became the world's biggest LNG supplier in 2023, surpassing Australia and Qatar, as surging global prices fed demand for more exports, due in part to supply disruptions and sanctions linked to Russia's 2022 invasion of Ukraine.

Gas was trading around $12 per mmBtu at the Dutch Title Transfer Facility TRNLTTFMc1 benchmark in Europe and $13 at the Japan Korea Marker JKMc1 benchmark in Asia. NG/EU