US natgas prices ease 1% ahead of storage report

U.S. natural gas futures eased about 1% on Thursday on forecasts for less demand over the next two weeks than previously projected, expectations supplies will soon rise once the Mountain Valley gas pipeline enters service, and news that recent increases in prices and demand prompted EQT EQT.N, the nation’s biggest gas producer, to start boosting output.

That price decline occurred ahead of what should be a bullish federal report that is expected to show last week’s storage build was smaller than usual for this time of year for a seventh week in a row after producers cut output earlier in the year after a drop in futures prices to 3-1/2-year lows in February and March.

Analysts forecast U.S. utilities added 74 billion cubic feet (bcf) of gas into storage during the week ended June 7. That compares with an increase of 90 bcf in the same week last year and a five-year (2019-2023) average rise of 89 bcf for this time of year.

Analysts said that would leave gas stockpiles about 24% above normal for this time of year.

Front-month gas futures NGc1 for July delivery on the New York Mercantile Exchange fell 3.5 cents, or 1.2%, to $3.010 per million British thermal units (mmBtu) at 9:31 a.m. EDT (1331 GMT).

The futures price decline occurred despite forecasts for hotter weather through at least the end of June that should boost the amount of gas power generators need to burn to keep air conditioners humming.

In the spot market, next-day gas at the AECO hub in Alberta, Canada fell to 47 cents per mmBtu, its lowest price since October 2022.

SUPPLY AND DEMAND

Financial firm LSEG said gas output in the Lower 48 U.S. states has fallen to an average of 97.8 billion cubic feet per day (bcfd) so far in June, down from 98.1 bcfd in May. That compares with a monthly record of 105.5 bcfd in December 2023.

On a daily basis, output was on track to rise by around 0.4 bcfd over the past two days to a preliminary 96.9 bcfd on Thursday, up from a 20-week low of 96.5 bcfd on Tuesday.

Before recent output declines in June, analysts said increases in May were a sign producers were slowly boosting output due to a 47% jump in futures prices in April and May. Output hit a six-week high of 99.5 bcfd on May 24. In fact, EQT, the nation’s biggest gas producer, said this week that it started boosting output.

Overall, U.S. gas production was still down around 9% so far in 2024 after several energy firms, including EQT EQT.N and Chesapeake Energy CHK.O, delayed well completions and cut drilling activities when prices fell in February and March. Chesapeake is on track to become the biggest producer after its merger with Southwestern Energy SWN.N.

Meteorologists projected weather across the Lower 48 states would remain hotter than normal through at least June 28.

LSEG forecast gas demand in the Lower 48, including exports, would jump from 94.9 bcfd this week to 98.5 bcfd next week. Those forecasts were lower than LSEG’s outlook on Wednesday.

Gas flows to the seven big U.S. LNG export plants, meanwhile, rose to 13.1 bcfd so far in June, from 12.9 bcfd in May.
Source: Reuters (Reporting by Scott DiSavino; Editing by Paul Simao)