U.S. natgas eases on lower demand forecast ahead of storage report

7/15/2021

U.S. natural gas futures slipped to a fresh one-week low on forecasts for less hot weather and lower air conditioning demand over the next two weeks than previously expected.

That price decline came ahead of a federal report expected to show a smaller-than-usual storage build last week when production was lower and exports were rising.

Analysts forecast U.S. utilities added 47 billion cubic feet (bcf) of gas into storage during the week ended July 9. That compares with an increase of 47 bcf in the same week last year and a five-year (2016-2020) average increase of 54 bcf. EIA/GAS

If correct, last week's injection would boost stockpiles to 2.621 trillion cubic feet (tcf), or 7.0% below the five-year average of 2.818 tcf for this time of year.

Front-month gas futures NGc1 fell 2.9 cents, or 0.8%, to $3.631 per million British thermal units (mmBtu) at 7:44 a.m. EDT (1144 GMT), putting the contract on track for its lowest close since July 7 for a second day in a row.

That also put the contract on track for a third consecutive day of declines for the first time since May.

Data provider Refinitiv said U.S. output in the Lower 48 states slipped to 91.3 billion cubic feet per day (bcfd) so far in July, due mostly to pipeline problems in West Virginia earlier in the month. That compares with an average of 92.2 bcfd in June and an all-time high of 95.4 bcfd in November 2019.

Refinitiv projected average gas demand, including exports, would rise from 91.5 bcfd this week to 93.1 bcfd next week as the weather turns seasonally hotter. Those forecasts were lower than Refinitiv projected on Wednesday.

The amount of gas flowing to U.S. liquefied natural gas (LNG) export plants averaged 10.9 bcfd so far in July, up from 10.1 bcfd in June but still below the record 11.5 bcfd in April.

With European TRNLTTFMc1 and Asian JKMc1 gas trading near $12 and $13 per mmBtu, respectively, analysts said buyers around the world would keep purchasing all the LNG the United States can produce.

U.S. pipeline exports to Mexico, meanwhile, averaged 6.5 bcfd so far in July, down from a record 6.8 bcfd in June.

(Reporting by Scott DiSavino)