US natgas prices steady as near-record output offsets near-record heat

By Scott DiSavino

July 25 (Reuters) - U.S. natural gas futures held steady on Friday as near-record output and lagging flows to liquefied natural gas export plants offset forecasts for near-record heat early next week.

That heat should cause power generators to burn more gas to meet soaring air conditioning demand, which will likely stress regional power systems.

Front-month gas futures for August delivery NGc1 on the New York Mercantile Exchange were up 0.6 cents, or 0.2%, to $3.100 per million British thermal units at 9:04 a.m. EDT (1304 GMT).

Despite the small increase, the contract remained in technically oversold territory for a third day in a row for the first time since April, with prices for the week down about 13% after gaining about 8% last week.

Meteorologists forecast the weather in the Lower 48 U.S. states would remain mostly hotter than normal through at least August 9, with the hottest days of the summer expected early next week.

Temperatures across the country will average around 82.4 degrees Fahrenheit (28.0 degrees Celsius) on July 28 and 82.9 F on July 29. If correct, that would top the summer's current hottest daily average of 80.3 F on June 24 but remain just shy of the daily average record high of 83.0 F on July 20, 2022, according to data from LSEG going back to 2018.

The heat already moving into the U.S. Northeast has caused homes and businesses to crank up their air conditioners, causing spot power prices to soar by 62% to around $141 per megawatt hour in New England and by 42% to $131 in PJM West Hub in Pennsylvania and Maryland.

Some utilities, including in New York, told customers participating in demand response programs to reduce the amount of energy they consume to save on energy bills and help keep grids reliable during periods of high demand.

But despite hotter than usual weather so far this summer, record output has enabled energy firms to keep adding more gas than usual into storage in most weeks. Analysts said gas stockpiles were currently around 6% above normal for this time of year and would likely keep growing in coming weeks. EIA/GASNGAS/POLL

SUPPLY AND DEMAND

LSEG said average gas output in the Lower 48 had risen to 107.3 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 to a preliminary two-week low of 106.5 bcfd on Friday since hitting a daily record high of 108.5 bcfd on July 18. Analysts have noted that preliminary data is often revised later in the day.

LSEG projected average gas demand in the Lower 48 states, including exports, would rise from 106.1 bcfd this week to 110.0 bcfd next week before sliding to 107.6 bcfd in two weeks. The forecasts for this week and next were similar to LSEG's outlook on Thursday.

The average amount of gas flowing to the eight big U.S. LNG export plants has risen to 15.7 bcfd so far in July, up from 14.3 bcfd in June but still below the monthly record high of 16.0 bcfd in April.

On a daily basis, however, LNG export feedgas was on track to drop to a one-month low of 15.2 bcfd on Friday, with a decline in gas flows to Cheniere Energy's LNG.N 3.9-bcfd Corpus Christi plant in Texas to a four-month low of 1.2 bcfd on Friday, down from 2.0 bcfd on Thursday and an average of 2.1 bcfd over the prior seven days.

Officials at Cheniere were not immediately available for comment, but did tell customers that compressor maintenance would reduce gas flows through a pipe that supplies the plant by around 0.4 bcfd on July 24.