US natgas futures dip to one-week low on high output, less hot weather

By Scott DiSavino

Aug 11 (Reuters) - U.S. natural gas futures eased to a one-week low on Monday on near-record output, ample supplies of the fuel in storage, and forecasts for less hot weather and lower demand through late August than previously expected.

That price decline came despite strong liquefied natural gas exports and forecasts of stronger demand this week than previously expected.

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

Front-month gas futures for September delivery NGc1 on the New York Mercantile Exchange fell 1.7 cents, or 0.6%, to $2.97 per million British thermal units (mmBtu) at 9:13 a.m. EDT (1313 GMT).

A lack of big price swings for the front-month in recent weeks cut historic or actual 30-day close-to-close futures volatility to 48.7%, the lowest since April 2024.

Historic daily volatility hit a record high of 177.7% in February 2022 and a record low of 7.3% in June 1991. Historic volatility has averaged 74.8% so far this year, versus 73.7% in 2024 and a five-year (2019 to 2023) average of 64.3%.

Looking forward, traders are showing signs that they are not worried about having enough gas supplies for this winter, with the premium of futures for March over April 2026 NGH26-J26 on track to fall to a record low of around 18 cents per mmBtu on Monday.

The industry calls the March-April spread the "widow maker" because rapid price moves resulting from changing weather forecasts have forced some speculators out of business, including the Amaranth hedge fund, which lost more than $6 billion in 2006.

Traders use the March-April and October-November NGV25-X25 spreads to bet on winter weather forecasts and supply and demand. March is the last month of the winter-heating season when utilities pull gas out of storage, and October is the last month of the summer cooling season when utilities inject gas into storage.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 states rose to 108.4 billion cubic feet per day so far in August, up from July's monthly record high of 107.9 bcfd.

Meteorologists forecast the weather would remain hotter than normal through at least August 26 but would be less hot than previously forecast for the period.

Despite a hotter-than-usual summer, record output has allowed energy firms to inject more gas into storage than usual in recent months. Analysts said gas stockpiles were currently around 6% above normal levels for this time of year and would likely keep growing in coming weeks. EIA/GAS NGAS/POLL

LSEG projected average gas demand in the Lower 48 states, including exports, would ease from 110.3 bcfd this week to 109.9 bcfd next week. The forecast for this week was higher than LSEG's outlook on Friday, while its forecast for next week was lower.

The average amount of gas flowing to the eight big U.S. LNG export plants rose to 16.2 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 17.0 bcfd on Monday with record gas flows to Venture Global's VG.N 3.2-bcfd Plaquemines plant in Louisiana. That compares with a daily record high of 17.3 bcfd on April 9.