U.S. natural gas prices ease 1% to 3-week low on less hot forecasts

(Reuters) - U.S. natural gas futures eased about 1% to a three-week low on Friday on forecasts for demand to decline as the heat wave blanketing much of the central part of the country and Texas becomes less brutal.

That heat wave, however, was still baking Texas on Friday, where power prices soared to a 30-month high and the state's grid operator, the Electric Reliability Council of Texas (ERCOT), called on consumers to conserve energy on Thursday afternoon.

Electric supplies in Texas were expected to remain tight late Friday, prompting some energy traders to guess ERCOT would again call on consumers to conserve power to reduce the demand burden on Friday.

Extreme heat boosts the amount of gas burned 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%), federal energy data showed.

Front-month gas futures for September delivery on the New York Mercantile Exchange fell 3.2 cents, or 1.3%, to $2.487 per million British thermal units (mmBtu) at 10:37 a.m. EDT (1437 GMT), putting the contract on track for its lowest close since Aug. 2.

For the week, the contract was down about 3% after falling about 8% last week.

The U.S. National Hurricane Center (NHC), meanwhile, forecast a tropical cyclone could form in the Caribbean Sea, or Gulf of Mexico over the next week.

Supply and demand

Data provider Refinitiv said average gas output in the U.S. Lower 48 states eased to 101.6 billion cubic feet per day (bcfd) so far in August, down from 101.8 bcfd in July. That compares with a monthly record of 102.2 bcfd in May.

Despite a seasonal cooling, meteorologists forecast the weather in the Lower 48 states will remain mostly hotter than normal through at least Sept. 9.

Refinitiv forecast U.S. gas demand, including exports, would rise from 103.9 bcfd this week to 104.3 bcfd next week before dropping to 102.6 bcfd as the weather turns seasonally cooler. The forecast for next week was higher than Refinitiv's outlook on Thursday due to an expected increase in the amount of gas flowing to liquefied natural gas (LNG) export plants.

Gas flows to the seven big U.S. LNG export plants, meanwhile, fell from an average of 12.7 bcfd in July to 12.2 bcfd so far in August due mostly to reductions at Cheniere Energy's Sabine Pass in Louisiana and Corpus Christi in Texas. That compares with a monthly record of 14.0 bcfd in April.

Cheniere's Corpus LNG export plant was on track to pull in about 2.2 bcfd of feedgas on Friday, up from around 1.6 bcfd on Wednesday and Thursday after Tropical Storm Harold passed close to the plant on Tuesday.

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