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U.S. natgas futures drop over 5% to 3-week low as output rises

U.S. natural gas futures jumped over 5% to a three-week low on Monday as output slowly increases despite forecasts for hotter weather and higher cooling demand over the next two weeks than previously expected.

Prices remained weak even though pipeline exports to Mexico are on track to hit a record high for the month.

Front-month gas futures fell 9.7 cents, or 5.7%, to $1.621 per million British thermal units at 10:14 a.m. EDT (1414 GMT). If the contract closes at its current level, it would be the lowest settle since June 26.

Refinitiv said production in the Lower 48 U.S. states averaged 88.4 billion cubic feet per day (bcfd) so far in July, up from a 20-month low of 87.0 bcfd in June but still well below the all-time monthly high of 95.4 bcfd in November. Traders noted output was rising as EQT Corp boosted production in Appalachia.

As consumers crank up their air conditioners, Refinitiv forecast U.S. demand, including exports, will rise from 92.5 bcfd this week to 94.1 bcfd next week. That is higher than Refinitiv’s outlook on Friday.

Pipeline gas flowing to U.S. LNG export plants averaged 3.3 bcfd (34% utilization) so far in July, down from a 20-month low of 4.1 bcfd in June and a record 8.7 bcfd in February. Utilization was about 90% in 2019.

U.S. pipeline exports, meanwhile, rose as consumers in neighboring countries cranked up their air conditioners.

Refinitiv said pipeline exports to Canada averaged 2.4 bcfd so far in July, up from 2.3 bcfd in June, but still below the all-time monthly high of 3.5 bcfd in December. Pipeline exports to Mexico averaged 5.56 bcfd so far this month, up from 5.44 bcfd in June and on track to top the record 5.55 bcfd in March.
Source: Reuters (Reporting by Scott DiSavino, Editing by Nick Zieminski and Jonathan Oatis)

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