US natgas prices ease to 9-month low on near-record output ahead of storage report

By Scott DiSavino

Aug 14 (Reuters) - U.S. natural gas futures eased about 1% to a nine-month low on Wednesday on forecasts for near-record output and a small decline in flows to liquefied natural gas (LNG) export plants due to a brief reduction at Freeport LNG's plant in Texas.

That small price decline came despite forecasts for higher demand over the next two weeks than previously expected and ahead of a federal storage report projected to show that energy firms added more gas into storage than normal last week during cooler-than-usual weather.

Front-month gas futures for September delivery NGc1 on the New York Mercantile Exchange fell 3.3 cents, or 1.2%, to $2.795 per million British thermal units by 9:02 a.m. EDT (1302 GMT), putting the contract on track for its lowest close since November 14.

Analysts forecast energy firms added 54 billion cubic feet (bcf) of gas into storage during the week ended August 8.

That compares with a decrease of 2 bcf during the same week last year and an average increase of 33 bcf over the 2020-2024 period. EIA/GAS, NGAS/POLL

If correct, that build would leave gas stockpiles about 7% above the five-year normal for this time of year.

The U.S. National Hurricane Center, meanwhile, projected Tropical Storm Erin will strengthen into a major hurricane as it moves west across the Atlantic Ocean toward the Bahamas by early next week.

Meteorologists at AccuWeather said Erin would likely blast Bermuda with wind and rain and produce dangerous beach conditions across the U.S. East Coast next week. Analysts noted the storm would also cool the weather along the U.S. East Coast.

In addition to Erin, the NHC said a disturbance in the western Gulf of Mexico had a 20% chance of strengthening into a tropical cyclone over the next seven days.

Even though storms can boost prices by knocking Gulf of Mexico gas production out of service, analysts have said storms are more likely to cut demand and prices by shutting LNG export plants and knocking power out to millions of homes and businesses, which reduces the amount of gas electric generators need to burn.

That is because only about 2% of all U.S. gas comes from the federal offshore Gulf of Mexico, while gas-fired power plants supply more than 40% of the nation's electricity.

SUPPLY AND DEMAND

Financial group LSEG said average gas output in the Lower 48 states rose to 108.1 billion cubic feet per day so far in August, up from a record monthly high of 107.9 bcfd in July.

On a daily basis, however, output has dropped about 3.3 bcfd to a one-month low of 106.4 bcfd on Wednesday since hitting a daily record high of 109.7 bcfd on July 28.

Meteorologists forecast the weather would remain mostly hotter than normal through at least August 29.

LSEG projected average gas demand in the Lower 48 states, including exports, would ease from 111.9 bcfd this week to 111.5 bcfd next week. Those forecasts were higher than LSEG's outlook on Wednesday.

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 record monthly high of 16.0 bcfd in April.

In Texas, Freeport LNG's export plant was on track to take in more gas on Thursday in a sign that one of its liquefaction trains likely exited Wednesday's short-term outage, according to a company filing with state regulators and gas flow data from LSEG.