U.S. natural gas futures held near a three-week low on Friday on forecasts for less hot weather in the U.S. Northeast, a rise in output, and reduced amounts of fuel flowing to the country’s liquefied natural gas (LNG) export plants as maintenance is ongoing at some facilities.
That lack of price movement came despite forecasts for the country’s overall weather to remain hotter than normal through the end of July, especially in Texas.
Power demand in Texas hit a record high for a second day in a row on Thursday and is expected to top that on Friday and on July 18 and 19, as homes and businesses keep their air conditioners cranked up to cope with a lingering heatwave, according to the Electric Reliability Council of Texas (ERCOT), the state’s power grid operator.
Extreme heat boosts the number of gas generators burn to produce power for cooling, especially in Texas, which gets most of its electricity from gas-fired plants. In 2022, about 49% of the state’s power came from gas-fired plants, with most of the rest from wind (22%), coal (16%), nuclear (8%) and solar (4%), according to federal energy data.
Front-month gas futures NGc1 for August delivery on the New York Mercantile Exchange fell 0.6 cents, or 0.2%, to settle at $2.539 per million British thermal units (mmBtu), their lowest close since June 20 for a second day in a row.
SUPPLY AND DEMAND
Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 101.9 billion cubic feet per day (bcfd) so far in July, up from 101.1 bcfd in June. That compares with a monthly record high of 102.0 bcfd in May.
Meteorologists forecast the weather in the Lower 48 states would remain hotter than normal through at least July 29.
With hotter weather coming, Refinitiv forecast U.S. gas demand, including exports, would rise from 101.2 bcfd this week to 106.6 bcfd next week and 107.4 bcfd in two weeks. The forecasts for this week and next week were higher than Refinitiv’s outlook on Thursday.
Gas flows to the seven big U.S. LNG export plants rose to an average of 12.7 bcfd so far in July from 11.6 bcfd in June. But that is still well below the monthly record of 14.0 bcfd in April due to ongoing maintenance at several facilities, including Cheniere Energy Inc’s LNG. A Sabine Pass in Louisiana and Corpus Christi in Texas.
The U.S. is on track to become the world’s biggest LNG supplier in 2023 – ahead of recent leaders Australia and Qatar – as much higher global prices continue to feed demand for U.S. exports due to supply disruptions and sanctions linked to Russia’s war in Ukraine.
Gas was trading around $9 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe TRNLTTFMc1 and $12 at the Japan Korea Marker (JKM) in Asia JKMc1. Those prices, however, were down about 62% so far this year after hitting record highs in 2022, due to mild winter temperatures and above-average storage inventories in the northern hemisphere. NG/EU
In 2022, roughly 69%, or 7.2 bcfd, of U.S. LNG exports went to Europe as shippers diverted cargoes from Asia to get higher prices. In 2021, when prices in Asia were higher, just 35%, or about 3.3 bcfd, of U.S. LNG exports went to Europe. With the return of higher gas prices in Asia this year, analysts said they expect U.S. LNG exports to Asia will increase. But that has not happened yet. Just 19%, or 2.1 bcfd, of U.S. LNG exports, went to Asia during the first half of 2023, while 70%, or 8.0 bcfd, went to Europe
Source: Hellenic Shipping News
