US natural gas futures climb 2% on near-record LNG export flows

By Scott DiSavino

Aug 6 (Reuters) - U.S. natural gas futures climbed about 2% on Wednesday on near-record gas flows to liquefied natural gas export plants and forecasts for hotter-than-normal weather to continue through at least late August.

The heat means homes and businesses will likely keep their air conditioners cranked up until the end of the month, forcing power generators to burn more gas than usual for this time of year. More than 40% of the electricity produced in the U.S. comes from gas-fired power plants.

Front-month gas futures for September delivery NGc1 on the New York Mercantile Exchange rose 6.7 cents, or 2.2%, to settle at $3.077 per million British thermal units.

Despite a hotter-than-usual summer, record output has allowed energy firms to inject more gas into storage than usual in recent months - although likely not during an extreme heatwave last week. Analysts said gas stockpiles were around 6% above normal for this time of year and would likely keep growing in coming weeks. EIA/GASNGAS/POLL

In the Atlantic Ocean, meanwhile, the U.S. National Hurricane Center said two disturbances could turn into tropical cyclones over the next week - one with a 30% chance of forming off the coasts of North and South Carolina and another with a 60% chance of forming in the North Central Atlantic. The system with a 30% chance of forming was downgraded from a 40% chance earlier in the day.

Analysts noted that East Coast storms are generally demand-destroying events that knock out power to homes and businesses, reducing the amount of gas power generators need to burn.

SUPPLY AND DEMAND

LSEG said average gas output in the Lower 48 states eased to 107.8 billion cubic feet per day (bcfd) so far in August, down from a monthly record high of 107.9 bcfd in July.

On a daily basis, output was on track to drop to a preliminary four-week low of 106.0 bcfd on Wednesday, down about 3.7 bcfd since hitting a daily record high of 109.7 bcfd on July 28. Preliminary data, however, is often revised later in the day.

LSEG projected average gas demand in the Lower 48 states, including exports, would rise from 105.6 bcfd this week to 110.3 bcfd next week. The forecast for this week was higher than LSEG's outlook on Tuesday.

The average amount of gas flowing to the eight big U.S. LNG export plants rose to 16.1 bcfd so far in August, up from 15.5 bcfd in July. That compares with a monthly record high of 16.0 bcfd in April.

On a daily basis, LNG export feedgas was on track to rise to a 16-week high of 16.7 bcfd on Wednesday after Freeport LNG's 2.1-bcfd export plant in Texas exited last week's outages and Venture Global LNG's VG.N 3.2-bcfd Plaquemines plant in Louisiana pulled in a record 3.2 bcfd. That compares with a total daily LNG feedgas record high of 17.3 bcfd on April 9.