U.S. natural gas futures edged up about 1% on Sept. 8 from a four-week low in the prior session on an expected smaller-than-expected storage build last week and forecasts for higher gas demand over the next two weeks than previously expected.
The U.S. Energy Information Administration (EIA) said utilities added 54 Bcf of gas to storage during the week ended Sept. 2. Analysts said that was smaller than usual as power generators burned lots of gas to produce power during a heat wave last week.
That was in line with the 54-Bcf build analysts forecast in a Reuters poll and compares with an increase of 48 Bcf in the same week last year and a five-year (2017-2021) average increase of 65 Bcf.
The heat seen last week was still baking the U.S. west.
California's power grid urged customers to conserve energy for a ninth day in a row on Thursday as homes and businesses crank up their air conditioners to escape a brutal heat wave lingering over the drought-stricken region since the start of September.
The small weekly storage increase came despite the ongoing outage at the Freeport LNG export plant in Texas, which has left more gas in the United States for utilities to inject into stockpiles for next winter.
Freeport, the second-biggest U.S. LNG export plant, was consuming about 2 Bcf/d of gas before it shut on June 8. Freeport LNG expects the facility to return to at least partial service in early to mid-November.
Front-month gas futures rose 7.3 cents, or 0.9%, to settle at $7.915/MMBtu. On Sept. 7, the contract closed at its lowest since Aug. 9 due in part to concerns Cheniere Energy Inc. might need to reduce LNG exports.
Earlier this week, the U.S. Environmental Protection Agency (EPA) denied Cheniere's request to exempt turbines at its two U.S. Gulf Coast terminals from a hazardous pollution rule. Some in the market fear that will force Cheniere to reduce exports. Cheniere, however, said the EPA decision will not affect its ability to supply LNG.
Despite the small increase, the front-month remained in technically oversold territory with a relative strength index (RSI) below 30 for a third consecutive day for the first time since early July.
So far this year, gas futures were up about 112% as higher prices in Europe and Asia keep demand for U.S. LNG exports strong. Global gas prices have soared due to supply disruptions and sanctions linked to Russia's Feb. 24 invasion of Ukraine.
Gas was trading around $64/MMBtu in Europe and $53/MMBtu in Asia.
Russian gas exports via 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 - averaged just 1.4 Bcf/d so far in September, down from 2.5 Bcf/d in August and 10.8 Bcf/d in September 2021.
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 and the Freeport outage prevents the country from exporting more LNG.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 99.2 Bcf/d so far in September from a record 98.0 Bcf/d in August.
With cooler weather coming, Refinitiv projected average U.S. gas demand, including exports, would slide from 97.4 Bcf/d this week to 93.3 Bcf/d next week. Those forecasts were higher than Refinitiv's outlook on Sept. 7.
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