Gas natural US natural gas futures gained ground as flows to the country’s LNG export facilities increased, US natural gas futures registered a slight advance, driven by increased supply to liquefied natural gas (LNG) export facilities. This movement comes in a market characterized by high production and above-average reserves.
In the New York Mercantile Exchange (NYMEX) futures for September delivery gained 2.2 cents, or 0.8%, to settle at $2.662 per million, British thermal units (mmBtu) despite this recovery, the contract had closed at its lowest level since April 28. Furthermore, it was heading for its seventh consecutive week of losses, a sequence not seen since February 2023. During that period, the cumulative decline was around 18%.
Natural gas production is keeping supply high
On the other hand, the behavior of longer-term contracts reflects that traders maintain a relatively comfortable outlook on supply. The 12-month futures contract fell to $3.09 per mmBtu, its lowest level since November 2014.
In this scenario, LSEG estimated that average natural gas production in the 48 contiguous states remained at 110.7 billion cubic feet per day (bcfd) during August, matching the monthly record set in July.
Furthermore, the high production and moderate temperatures observed during the spring allowed inventories to remain above the average of the last five years since March.
Analysts estimated that stockpiles would be 6.6% above normal levels during the week ending August 7, the previous week, the surplus had been 6.7%.
The heat is sustaining demand for gas for electricity generation
Meanwhile, temperatures continue to be a relevant factor for consumption, with weather forecasts pointing to mostly warmer than usual conditions until August 22.
This scenario could maintain high natural gas consumption by power plants due to the intensive use of air conditioning systems. Approximately 40% of US electricity generation comes from gas-fired facilities.
According to LSEG, average demand in the 48 contiguous states, including exports, is expected to rise from 111 billion cubic feet per day this week to 114.6 billion next week. It could then fall to 110 billion cubic feet per day within two weeks.
However, demand forecasts for this week and next fell short of the firm’s previous estimates.
LNG exports regain momentum
In turn, the flows to the nine main US export plants of LNG they averaged 17 billion cubic feet per day during August, compared to 17.2 billion recorded in July.
Part of that reduction was related to lower volumes at facilities located in Texas, including the Freeport LNG plant, with a capacity of 2.4 billion cubic feet per day, and the operational Golden Pass liquefaction train, a project of ExxonMobil y QatarEnergy.
However, the gas supply to Golden Pass showed signs of recovery, with the flow to the facility on track to reach a record 600 million cubic feet per day.
As a result, daily flows to all US GLN export plants could reach 17.7 billion cubic feet per day, their highest volume in four weeks.
The US maintains its weight in the global LNG market
Furthermore, the growth in export capacity has strengthened the United States’ position in the international market. The country became the world’s largest exporter of GLN in 2023, surpassing Australia and Qatar.
The US market is increasingly linked to international prices due to expanding exports, in Europe, gas was trading around $19 per mmBtu using the Dutch Title Transfer Facility (TTF) index.
In Asia, the Japan-Korea Marker (JKM) was around $21 per mmBtu; this difference compared to the US price continues to offer a favorable context for GNL exports.
For now, the rebound in flows to terminals is providing support for natural gas futures; however, record production and above-average inventories are maintaining ample supply, limiting upward pressure on prices.
Source: Pipeline & Gas Journal
Photo: Shutterstock
