U.S. natural gas futures slid about 1% on Aug. 10 on forecasts for less hot weather through mid-August than previously expected.

That decline came despite a preliminary drop in daily output and forecasts for more demand this week.

Also pressuring prices was 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 LNG, the second-biggest U.S. LNG export plant, was consuming about 2 Bcf/d of gas before it shut on June 8. Freeport expects the plant to return to at least partial service in early October.

Front-month gas futures fell 10.5 cents, or 1.3%, to $7.728/MMBtu at 7:22 a.m. CDT.

So far this year, the front-month is up about 108% as much higher prices in Europe and Asia feed strong demand for U.S. LNG exports. Global prices soared this year as several countries cut their use of Russian energy after Moscow invaded Ukraine on Feb. 24.

Gas was trading around $62/MMBtu in Europe and $45 in Asia.

The United States became the world’s top LNG exporter during the first half of 2022. But no matter how high global gas prices rise, the United States cannot export more LNG because the country’s plants were already operating at full capacity.

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—held at 2.5 Bcf/d on Aug. 9, the same as Aug. 8.

That compares with an average of 2.8 Bcf/d in July and 10.4 Bcf/d 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 and the Freeport outage prevent the country from exporting more LNG.

Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 97.8 Bcf/d so far in August from a record 96.7 Bcf/d in July.

On a daily basis, however, output was on track to drop by a preliminary 2.2 Bcf/d over the past couple of days since hitting a record 98.3 Bcf/d on Aug. 8. Preliminary data is often revised later in the day.

With less hot weather expected, Refinitiv projected average U.S. gas demand, including exports, would fall from 101.5 Bcf/d this week to 97.2 Bcf/d next week. The forecast for this week was higher than Refinitiv’s outlook on Aug. 9.

The average amount of gas flowing to U.S. LNG export plants held at 10.9 Bcf/d so far in August, the same as July. That compares with a monthly record of 12.9 Bcf/d in March. The seven big U.S. export plants can turn about 13.8 Bcf/d of gas into LNG.

The reduction in U.S. exports from Freeport is a problem for Europe, where most U.S. LNG has gone this year as countries there wean themselves off Russian energy.

Russia, the world’s second-biggest gas producer, has provided about one-third of Europe’s gas, totaling about 18.3 Bcf/d 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 their five-year (2017-2021) average for this time of year, according to Refinitiv. Storage was currently at about 68% of capacity.

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