US natgas prices slide 3% to 1-week low on near-record output, lagging LNG exports

By Scott DiSavino

July 22 (Reuters) - U.S. natural gas futures slid about 3% to a one-week low on Tuesday on near-record output and forecasts for less hot weather over the next two weeks than previously expected.

Energy traders said prices were also weighed down by stagnant gas flows to liquefied natural gas export plants and ample amounts of gas in storage.

Front-month gas futures for August delivery NGc1 on the New York Mercantile Exchange fell 9.7 cents, or 2.9%, to $3.228 per million British thermal units, putting the contract on track for its lowest close since July 9.

Despite hotter than normal weather so far this summer, analysts projected record output should allow energy firms to keep injecting more gas into storage than usual in coming weeks. Gas stockpiles were already about 6% above normal levels for this time of year. EIA/GAS NGAS/POLL

SUPPLY AND DEMAND

LSEG said average gas output in the Lower 48 rose to 107.2 billion cubic feet per day so far in July, up from a monthly record high of 106.4 bcfd in June.

On a daily basis, however, output was on track to drop by around 2.4 bcfd to a preliminary one-week low of 106.1 bcfd on Tuesday since hitting a daily record of 108.4 bcfd on July 18. Analysts have noted that preliminary data is often revised later in the day.

Meteorologists forecast the weather in the Lower 48 U.S. states would remain mostly hotter than normal through at least August 6 - though less hot than previously forecast - with the hottest days of the summer expected early next week.

Temperatures across the country will average around 81 degrees Fahrenheit (27.2 degrees Celsius) on July 28 and 82 F on July 29. That would exceed the summer's current hottest daily average of 80 F on June 24 but would remain below the daily average record high of 83 F on July 20, 2022, according to data from financial firm LSEG going back to 2018.

LSEG forecast average gas demand in the Lower 48, including exports, would rise from 105.8 bcfd this week to 110.0 bcfd next week. Those forecasts were lower than LSEG's outlook on Monday.

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.

On a daily basis, LNG feedgas was only around 15.3 bcfd on Tuesday due to small reductions at several plants, including Freeport LNG's 2.1-bcfd export plant in Texas, where gas flows have averaged 1.8 bcfd over the past week, down from 1.9 bcfd over the prior seven days, according to LSEG data.

Officials at Freeport had no comment on the small reduction in flows.

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 $11 per mmBtu at the Dutch Title Transfer Facility TRNLTTFMc1 benchmark in Europe and $12 at the Japan Korea Marker JKMc1 benchmark in Asia. NG/EU