U.S. natural gas futures hold near 11-week low as LNG exports decline

U.S. natural gas futures held near an 11-week low on Friday amid forecasts of warmer weather, higher demand and lower production than last month offset a drop in liquefied natural gas (LNG) exports due to the extended shutdown of the Freeport LNG export plant in Texas.

In Texas, electricity demand hit record highs again this week during a persistent heat wave. Analysts said Freeport’s shutdown should allow U.S. utilities to quickly replenish low gas inventories for next winter.

The June 8 shutdown reduced the amount of U.S. gas available to the rest of the world, particularly Europe, where most U.S. LNG went as countries there weaned off Russian power after the shutdown. invasion of Ukraine by Moscow in February.

Freeport, the second-largest LNG export plant in the United States, consumes about 2 billion cubic feet per day (bcfd) of gas, so a 90-day shutdown would put about 180 billion cubic feet (bcf) of gas additional available to the US market.

First-month gas futures for July delivery on the New York Mercantile Exchange (NYMEX) rose 1.4 cents, or 0.2%, to $6.253 per million British thermal units (mmBtu) at 8:21 a.m. EDT (12:21 p.m. GMT). On Thursday, the contract closed at its lowest since April 6. That kept the contract in technical oversold territory, with the Relative Strength Index (RSI) below 30 for a fifth straight day for the first time since January 2020.

For the week, the first month was down about 10% after falling 22% last week, putting it on track to fall for a second consecutive week for the first time since February. These sharp declines in the first month of July pushed the August futures premium over July to an all-time high.

Despite recent declines, US gas futures are still up around 69% so far this year as much higher prices in Europe and Asia keep demand for US LNG exports strong. , especially as Russia’s invasion of Ukraine has fueled fears that Moscow could cut gas supplies to Europe.

Gas was trading around $41 per mmBtu in Europe and $37 in Asia. For the week, gas prices at the Title Transfer Facility (TTF) in the Netherlands, Europe’s gas benchmark, rose around 6% after Russia cut pipeline exports to Europe earlier in the year. the week. Russia kept pipeline exports at around 3.7 billion cubic feet per day for a fourth consecutive day on Thursday on the three main lines to Germany – North Stream 1 (Russia-Germany), Yamal (Russia-Belarus- Poland-Germany) and Russia-Ukraine- Route Slovakia-Czech Republic-Germany. This compares to a recent high of 6.5 bcfd about two weeks ago and an average of 11.6 bcfd in June 2021.

Data provider Refinitiv said average gas production in the lower 48 U.S. states slipped to 95.0 bcfd so far in June, from 95.2 bcfd in May. That compares to a monthly record of 96.1 billion cubic feet per day in December 2021. With warmer weather on the way, Refinitiv forecast that average U.S. gas demand, including exports , would increase from 92.9 billion cubic feet per day this week to 95.2 billion cubic feet per day next week and 97.2 billion cubic feet per day in two weeks.

The forecast for next week was lower than Refinitiv’s outlook on Thursday. The amount of gas flowing to LNG export plants in the United States has fallen from an average of 12.5 billion cubic feet per day in May to 11.3 billion cubic feet per day so far in June due to the Freeport outage, according to Refinitiv. This compares to a monthly high of 12.9 bcfd in March. The seven major US export plants can transform about 13.6 billion cubic feet per day of gas into LNG.

On a daily basis, production was on track to fall to 10.3 billion cubic feet per day on Friday, the lowest since November 2021, due to the Freeport outage and small reductions at several other plants.

(Reporting by Scott DiSavino; Editing by Jan Harvey)

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