U.S. natgas drops 6% on record output, less hot forecasts


Article content

U.S. natural gas futures fell about 6% to near a three-week low on Monday on record

output and forecasts for cooler weather and lower air conditioning demand over the next two weeks than

previously expected.

Also weighing on prices was a drop in pipeline exports to Mexico from Texas and the ongoing outage at the

Freeport liquefied natural gas (LNG) export plant in Texas, both of which leaves more gas in the United States

for utilities to inject into stockpiles for next winter.

Freeport LNG, the second-biggest LNG export plant in the United States, was consuming about 2 billion

Advertisement 2

Article content

cubic feet per day (bcfd) of gas before it shut on June 8. Freeport expects to return the facility to at least

partial service in early October.

Front-month gas futures fell 47.5 cents, or 5.9%, to settle at $7.589 per million British thermal

units (mmBtu), their lowest close since July 19.

So far this year, the front-month is up about 103% as much higher prices in Europe and Asia feed strong

demand for U.S. LNG exports. Global gas prices soared this year as several countries around the world cut

their use of Russian energy after Moscow invaded Ukraine on Feb. 24.

Gas was trading around $57 per mmBtu in Europe and $44 in Asia.

The United States became the world’s top LNG exporter during the first half of 2022. But no matter how

Advertisement 3

Article content

high global gas prices rise, the United States cannot export any more LNG because the country’s plants are

already operating at full capacity.

Russian gas exports on the three main lines into Germany – Nord Stream 1 (Russia-Germany), Yamal

(Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route – held at 2.5

bcfd on Sunday, the same as Saturday.

That compares with an average of 2.8 bcfd in July and 10.4 bcfd in August 2021.

TOP PRODUCER

U.S. gas futures lag far behind global prices because the United States is the world’s top producer, with

all the fuel it needs for domestic use, while capacity constraints limit LNG exports.

Data provider Refinitiv said average gas output in the U.S. Lower 48 states has risen to 97.9 bcfd so far

Advertisement 4

Article content

in August from a record 96.7 bcfd in July.

With the weather expected to be less hot, Refinitiv projected average U.S. gas demand, including exports,

would fall from 100.5 bcfd this week to 97.7 bcfd next week. Those forecasts are lower than Refinitiv’s

outlook on Friday.

The average amount of gas flowing to U.S. LNG export plants has slid to 10.8 bcfd so far in August from

10.9 bcfd in July. That compares with a monthly record of 12.9 bcfd in March. The seven big U.S. export plants

can turn about 13.8 bcfd of gas into LNG.

The reduction in U.S. exports from Freeport is a problem for Europe, where most U.S. gas exports have gone

this year as countries there wean themselves off Russian energy.

Russia, the world’s second-biggest gas producer, has provided about 30% to 40% of Europe’s gas, totaling

Advertisement 5

Article content

about 18.3 bcfd in 2021. The European Union wants to cut Russian gas imports by two-thirds by the end of 2022

and refill stockpiles to 80% of capacity by Nov. 1 and 90% by Nov. 1 each year beginning in 2023.

Gas stockpiles in Northwest Europe – Belgium, France, Germany and the Netherlands – were

about 4% below the five-year (2017-2021) average for this time of year, according to Refinitiv. Storage was

currently about 67% of capacity.

That is much healthier than the situation for U.S. inventories, which were about 12% below their five-year

norm.

Week ended Week ended Year ago Five-year

Aug 5 Jul 29 Aug 5 average

(Forecast) (Actual) Aug 5

U.S. weekly natgas storage change (bcf): +36 +41 +44 +45

U.S. total natgas in storage (bcf): 2,493 2,457 2,769 2,839

Advertisement 6

Article content

U.S. total storage versus 5-year average -12.2% -12.1%

Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five Year

Last Year Average Average

2021 (2017-2021)

Henry Hub 7.76 8.06 4.03 3.73 2.89

Title Transfer Facility (TTF) 58.26 57.96 15.43 16.04 7.49

Japan Korea Marker (JKM) 44.66 44.61 16.36 18.00 8.95

Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days

Two-Week Total Forecast Current Day Prior Day Prior Year 10-Year 30-Year

Norm Norm

U.S. GFS HDDs 1 2 1 3 4

U.S. GFS CDDs 230 248 216 198 190

U.S. GFS TDDs 231 250 217 201 194

Refinitiv U.S. Weekly GFS Supply and Demand Forecasts

Prior Week Current Week Next Week This Week Five-Year

Last Year Average For

Month

U.S. Supply (bcfd)

Advertisement 7

Article content

U.S. Lower 48 Dry Production 98.0 98.0 98.3 93.8 86.5

U.S. Imports from Canada 8.1 8.3 8.4 8.3 8.0

U.S. LNG Imports 0.0 0.0 0.0 0.0 0.1

Total U.S. Supply 106.1 106.2 106.7 102.1 94.6

U.S. Demand (bcfd)

U.S. Exports to Canada 2.6 2.7 2.6 2.4 2.5

U.S. Exports to Mexico 5.5 5.0 5.8 6.4 5.4

U.S. LNG Exports 10.9 10.7 10.1 10.1 4.4

U.S. Commercial 4.4 4.4 4.4 4.4 4.5

U.S. Residential 3.5 3.5 3.5 3.5 3.4

U.S. Power Plant 44.0 45.7 42.6 40.3 38.8

U.S. Industrial 21.4 21.3 21.5 21.1 21.2

U.S. Plant Fuel 4.8 4.8 4.9 4.8 4.8

U.S. Pipe Distribution 2.1 2.2 2.1 2.2 2.1

U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1

Total U.S. Consumption 80.4 82.1 79.1 76.4 74.9

Total U.S. Demand 99.4 100.5 97.7 95.3 87.2

U.S. weekly power generation percent by fuel – EIA

Advertisement 8

Article content

Week ended Week ended Week ended Week ended Week ended

Aug 12 Aug 5 Jul 29 Jul 22 Jul 15

Wind 9 8 7 8 6

Solar 3 3 3 3 3

Hydro 5 5 5 6 6

Other 2 2 2 2 2

Petroleum 0 0 0 0 0

Natural Gas 43 42 42 45 44

Coal 21 21 22 22 21

Nuclear 17 17 17 17 17

SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)

Hub Current Day Prior Day

Henry Hub 8.30 8.40

Transco Z6 New York 7.89 7.87

PG&E Citygate 9.32 9.21

Dominion South 7.44 7.52

Chicago Citygate 7.83 7.85

Algonquin Citygate 8.31 8.35

SoCal Citygate 9.56 9.89

Waha Hub 6.90 7.26

AECO 2.60 3.63

SNL U.S. Power Next-Day Prices ($ per megawatt-hour)

Hub Current Day

New England 118.50 164.25

PJM West 110.25 114.50

Ercot North 83.00 122.50

Mid C 152.42 102.83

Palo Verde 124.67 101.25

SP-15 92.75 102.75

(Reporting by Scott DiSavino; Editing by Paul Simao and Marguerita Choy)

Advertisement

Comments

Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.



Source link

Comments are closed.