US natgas prices ease to nine-month low on record output, ample fuel in storage

By Scott DiSavino

Aug 20 (Reuters) - U.S. natural gas futures eased about 1% to a nine-month low on Wednesday on near-record output and ample amounts of fuel in stockpiles.

That small price decline occurred despite forecasts for higher demand over the next two weeks than previously expected and rising gas flows to liquefied natural gas export plants with the return of a liquefaction train at Freeport LNG in Texas.

Front-month gas futures for September delivery NGc1 on the New York Mercantile Exchange fell 1.4 cents, or 0.5%, to settle at $2.752 per million British thermal units, their lowest close since November 8 for a second day in a row.

That price decline also kept the front-month in technically oversold territory for a second day in a row.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 states has risen to 108.4 billion cubic feet per day so far in August, up from a record monthly high of 107.8 bcfd in July.

Meteorologists forecast the weather will remain mostly near normal through September 4, which is about the same as previously expected.

Despite hotter-than-usual weather earlier in the summer, record output allowed energy companies to inject more gas into storage than usual in recent months.

Analysts said there was about 6% more gas in storage than normal for this time of year and predicted inventories would keep growing at a faster than usual pace in coming weeks. EIA/GAS NGAS/POLL

LSEG projected average gas demand in the Lower 48 states, including exports, would ease from 111.0 bcfd this week to 106.6 bcfd next week. Those forecasts were higher than LSEG's outlook on Tuesday.

The average amount of gas flowing to the eight big U.S. LNG export plants has risen to 15.8 bcfd so far in August, up from 15.5 bcfd in July. That reading compares with a record monthly high of 16.0 bcfd in April.

On a daily basis, LNG export feedgas was on track to rise to 15.3 bcfd on Wednesday from a two-week low of 14.2 bcfd on both Monday and Tuesday due to reductions at several plants, including Cheniere Energy's LNG.N 4.5-bcfd Sabine Pass facility in Louisiana, Cameron LNG's 2.0-bcfd plant in Louisiana, and Freeport LNG's 2.1-bcfd plant in Texas.

ATLANTIC STORMS

The U.S. National Hurricane Center projected Hurricane Erin, which was in the Atlantic Ocean between Georgia and Bermuda, would move northeast off the U.S. East Coast for the rest of the week without hitting land. The storm, however, could cause some tropical storm force winds in eastern North Carolina and Virginia over the next 24 hours.

The NHC said there were two other systems in the Atlantic Ocean that could strengthen into cyclones over the next week - one with a 60% chance and the other with a 40% chance. Both systems, however, were expected to remain far from the U.S. mainland, at least for the next week or so.

Even though storms can boost gas 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, reducing the amount of gas that electric generators need to burn.

Only about 2% of all U.S. gas comes from the federal offshore Gulf of Mexico, while more than 40% of the electricity produced in the country comes from gas-fired power plants.