US natgas prices climb 2% on lower output, higher LNG export flows ahead of storage report

By Scott DiSavino

Aug 21 (Reuters) - U.S. natural gas futures climbed about 2% on Thursday on recent declines in daily output and an increase in gas flows to liquefied natural gas (LNG) export plants.

Front-month gas futures for September delivery NGc1 on the New York Mercantile Exchange rose 4.9 cents, or 1.8%, to $2.801 per million British thermal units (mmBtu) at 9:07 a.m. EDT (1307 GMT). On Wednesday, the contract closed at its lowest since November 8.

Thursday's price increase, which pushed the contract out of technically oversold territory, came ahead of the release of a federal storage report expected to show energy firms added less gas into storage last week than usual due to increased cooling demand.

Analysts forecast energy firms added 22 billion cubic feet (bcf) of gas into storage during the week ended August 15.

That compares with an increase of 29 bcf during the same week last year and an average build of 35 bcf over the 2020 to 2024 period. EIA/GAS NGAS/POLL

If correct, last week's build left gas stockpiles about 6% above the five-year normal for this time of year.

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 13 cents per mmBtu.

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 a record monthly high of 107.8 bcfd in July.

On a daily basis, however, output was on track to drop by about 3.6 bcfd to a preliminary six-week low of 106.4 bcfd on Thursday since hitting a daily record high of 109.8 bcfd on July 28.

Meteorologists forecast the weather will remain mostly near normal through September 5, which is about the same as previously expected.

LSEG projected average gas demand in the Lower 48 states, including exports, would ease from 110.8 bcfd this week to 106.8 bcfd next week. Those forecasts were similar to LSEG's outlook on Wednesday.

The average amount of gas flowing to the eight big U.S. LNG export plants rose to 15.8 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.

On a daily basis, LNG export feedgas was on track to rise to 15.5 bcfd on Thursday, up from an average of 14.2 bcfd over the prior three days due to reductions at several plants, including Venture Global LNG's 1.6-bcfd Calcasieu in Louisiana, Cameron LNG's 2.0-bcfd plant in Louisiana, and Freeport LNG's 2.1-bcfd plant in Texas.

In the Atlantic basin, meanwhile, the U.S. National Hurricane Center projected Hurricane Erin, currently located in the ocean between North Carolina and Bermuda, would move northeast off the east coasts of the U.S. and Canada for the next seven days or so.

Erin was expected to cause some tropical storm force winds and rough seas off eastern North Carolina and Virginia over the next 24 hours.