U.S. natural gas prices ease on forecasts for less demand next week
(Reuters) - U.S. natural gas futures eased about 1% on Friday on forecasts for less demand next week than previously expected.
That price decline came despite a drop in daily output and forecasts for hotter-than-normal weather to continue through early August, especially in Texas and California.
Power demand in Texas hit a record high for a second day in a row earlier this week on Tuesday and will likely break that record on Friday and again next week as homes and businesses keep air conditioners cranked up to escape a lingering heatwave, according to the Electric Reliability Council of Texas (ERCOT), the state's power grid operator.
Extreme heat boosts the amount 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 coming from wind (22%), coal (16%), nuclear (8%) and solar (4%), according to federal energy data.
In California, meanwhile, the state's grid operator, the California Independent System Operator (ISO), declared an emergency alert for about an hour late Thursday as the sun went down and solar power was on the decline "due to heat conditions and higher than anticipated demand."
The California ISO, which does not anticipate the need to ask customers to conserve energy on Friday, said it was able to end the emergency after securing additional resources. The ISO did not say where those resources came from but a look at its website showed that imports from other states increased around that time.
In the spot market, soaring power demand in California boosted some next-day electric and gas prices in the U.S. West to their highest in three months, including power at the Mid Columbia Hub in the Pacific Northwest, where much of California's electric imports come from.
Front-month gas futures for August delivery on the New York Mercantile Exchange fell 3.1 cents, or 1.1%, to $2.726 per million British thermal units at 10:59 a.m. EDT (1459 GMT). On Thursday, the contract closed at its highest since June 30.
For the week, the contract was up about 8%, erasing most of its losses of around 9% from the prior two weeks.
Supply and demand
Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 101.5 billion cubic feet per day (bcfd) so far in July, up from 101.0 bcfd in June. That compares with a monthly record of 101.8 bcfd in May.
On a daily basis, however, output was on track to drop by 1.8 bcfd to a preliminary five-week low of 99.4 bcfd on Friday due mostly to declines in Pennsylvania and Colorado. Analysts have noted preliminary data was often revised later in the day.
Meteorologists forecast the weather in the Lower 48 states would remain hotter than normal through at least Aug. 5.
With power generators expected to burn even more gas in coming weeks and LNG export plants expected to consume more of the fuel as they exit maintenance outages, Refinitiv forecast U.S. gas demand, including exports, would rise from 105.7 bcfd this week and next to 107.7 bcfd in two weeks. The forecast for next week was lower 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. That was still well below the monthly record of 14.0 bcfd in April due to ongoing maintenance at several facilities in Louisiana, including Cameron LNG, Cheniere Energy's Sabine Pass and Venture Global LNG's Calcasieu.
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