Natural gas futures rebound amid increased flow to LNG plants
US natural gas futures edged higher on increased flows to liquefied natural gas (LNG) plants. However, record production and ample storage levels continue to limit a broader market recovery.
Specifically, futures for September delivery traded on the New York Mercantile Exchange advanced 2.2 cents, equivalent to 0.8%, to stand at $2.662 per million British thermal units (mmBtu).
The move represents a recovery after the contract closed Thursday at its lowest level since April 28. Even so, accumulated downward pressure continues to weigh heavily on the price of US natural gas.
Natural gas futures face a prolonged decline
Despite gains in the last session, contracts were headed for their seventh consecutive week of losses. This is a streak not seen since February 2023.
During those seven weeks, futures prices accumulated a drop of nearly 18%. This trend shows that the market continues to be influenced by the abundant supply of gas available in the United States.
Furthermore, the 12-month futures contract fell to $3.09 per mmBtu, its lowest level since November 2024. This behavior suggests that traders maintain an expectation of sufficient supply to meet future demand.
Natural gas production remains at record levels
On the other hand, LSEG data shows that average production in the 48 continental United States remained at 110.7 billion cubic feet per day (bcfd) during August.
That volume matches the monthly record reached in July and maintains a high availability of gas in the US market.
Furthermore, the combination of high production and moderate temperatures during the spring allowed energy companies to build up larger reserves. Inventories have remained above the five-year average since March.
Analysts estimated that inventories would end the week ending August 7 6.6% above normal levels, compared to the 6.7% surplus recorded a week earlier.
Therefore, although high summer temperatures have boosted consumption, there is still enough gas in storage to contain a steeper rise in prices.
The heat sustains the demand for gas to generate electricity
Meanwhile, weather forecasts predict mostly above-average temperatures until August 22. This situation may keep gas consumption at power plants high due to the use of air conditioning systems.
Around 40% of the United States' electricity generation comes from gas-fired power plants, so temperature variations can have a considerable effect on consumption during the summer.
LSEG projected that average gas demand in the 48 contiguous states, including exports, would increase from 111 bcfd this week to 114.6 bcfd next week.
Consumption could then decline to approximately 110 bcfd within two weeks. Forecasts for this week and next were lower than the firm's previous estimates.
Flows to LNG plants are increasing again
Meanwhile, natural gas exports are once again capturing market attention. Flows to the nine largest US LNG export plants had declined from an average of 17.2 bcfd in July to 17 bcfd in August.
Part of the reduction was related to lower volumes at Texas facilities. These include Freeport LNG and the liquefaction train operating in Golden Pass.
However, flows began to recover. Gas supplies to Golden Pass were on track to reach a record 0.6 bcfd , which could contribute to increasing the total volume destined for US terminals.
If this increase continues, daily flows to export plants could reach 17.7 bcfd , their highest level in four weeks.
This increase helps explain the recent rise in futures prices. A larger volume allocated to LNG production increases domestic demand for gas, which serves as a feedstock for liquefaction terminals.
Golden Pass and Freeport LNG influence export flows
In this scenario, the activity of the Texas terminals is particularly relevant. The Freeport LNG plant has an indicated capacity of 2.4 bcfd, while the Golden Pass liquefaction train in operation reaches 0.8 bcfd.
Therefore, changes in their operations can significantly alter the volume of gas that reaches all the export terminals.
Golden Pass is linked to ExxonMobil and Qatar Energy. The increase in its flows represents an additional source of demand in a US market currently characterized by high production.
The United States maintains its weight in the global LNG market
Furthermore, the growth in export capacity has transformed the destination of gas produced in the United States. The country became the world's largest exporter of LNG in 2023, surpassing Australia and Qatar.
The price differential between the United States and major international markets helps sustain this trade. According to the data provided, gas was trading at around $19 per mmBtu on the European TTF index and close to $21 per mmBtu on the Asian JKM.
These figures are well above the $2,662 per mmBtu recorded for the September US contract. Although these are markets with different characteristics and benchmarks, the gap demonstrates the economic attractiveness that US supply can have for international LNG trade.
What could affect the price of natural gas now?
Looking ahead to the next sessions, the behavior of natural gas futures will depend on the balance between several factors.
On the one hand, higher-than-usual temperatures can sustain demand from power plants. At the same time, increased activity at LNG plants can absorb more US production and raise export volumes.
On the other hand, record production continues to provide ample supply. Furthermore, reserves remain above the five-year average.
Thus, the market faces two opposing forces: increased demand for heating and LNG versus high domestic supply. Inventory levels, temperatures, and flows to terminals will determine which factor exerts the most pressure on natural gas prices in the coming weeks.
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