07/10/2022

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U.S. natgas futures rise 3% on output drop ahead of storage report

July 14 (Reuters) – U.S. natural gas futures rose about 3% to a fresh three-week high on Thursday on a drop in daily gas output over the past few days and forecasts for hotter weather and more demand over the next two weeks than previously expected. That heat has already boosted power demand to record levels in several parts of the country as homes and businesses crank up their air conditioners, including Texas where conservation efforts saved the state’s grid operator from taking emergency steps, like rotating blackouts to avoid widespread outages. The price increase came ahead of a federal storage report expected to show a slightly bigger-than-normal storage build last week due to the ongoing outage at Freeport LNG’s liquefied natural gas export plant in Texas that left more gas in the United States for utilities to refill low stockpiles. That storage build came despite extreme heat last week that forced generators to burn lots of gas to keep air conditioners humming. Analysts forecast U.S. utilities added 58 billion cubic feet (bcf) of gas to storage during the week ended July 8. That compares with an increase of 49 bcf in the same week last year and a five-year (2017-2021) average increase of 55 bcf. If correct, last week’s increase would boost stockpiles to 2.369 trillion cubic feet (tcf), or 11.9% below the five-year average of 2.688 tcf for this time of the year. Freeport, the second-biggest U.S. LNG export plant, was consuming about 2 billion cubic feet per day (bcfd) of gas before it shut on June 8. Freeport LNG has said the facility could return by October. Some analysts, however, think the plant could remain shut for longer. Front-month gas futures rose 18.1 cents, or 2.7%, to $6.870 per million British thermal units (mmBtu) at 8:15 a.m. EDT (1215 GMT), putting the contract on track for its highest close since June 22 for a second day in a row. So far this year, the front-month was up about 83% as much higher prices in Europe and Asia keep demand for U.S. LNG exports strong, especially since Russia’s invasion of Ukraine stoked fears Moscow would cut gas supplies to Europe. Gas was trading around $52 per mmBtu in Europe, which is a four-month high, and $39 in Asia . Russian gas exports on the three main lines into Germany – Nord Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route – held around 1.4 bcfd on Wednesday, the same as Tuesday. That is down from an average of 3.7 bcfd over the past month due to a maintenance shutdown of Nord Stream on July 11 and an average of 9.4 bcfd in July 2021. The group operating Nord Stream said the pipe should return around July 21. Analysts, however, said the outage could last longer. TOP PRODUCER U.S. futures lag far behind global prices because the United States is the world’s top producer, with all the gas it needs for domestic use, while capacity constraints limit LNG exports. Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 95.9 bcfd so far in July from 95.3 bcfd in June. That compares with a monthly record high of 96.1 bcfd in December 2021. On a daily basis, however, U.S. output was on track to drop by 2.9 bcfd this week to a preliminary 11-week low of 93.7 bcfd on Thursday. Preliminary data is often revised later in the day. With hotter weather coming, Refinitiv projected average U.S. gas demand including exports would rise from 99.1 bcfd this week to 99.9 bcfd next week. Those forecasts were higher than Refinitiv’s outlook on Wednesday. Week ended Week ended Year ago Five-year Jul 8 Jul 1 Jul 8 average (Forecast) (Actual) Jul 8 U.S. weekly natgas storage change (bcf): +58 +60 +49 +55 U.S. total natgas in storage (bcf): 2,369 2,311 2,621 2,688 U.S. total storage versus 5-year average -11.9% -12.2% Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five Year Last Year Average Average 2021 (2017-2021) Henry Hub 6.79 6.70 3.82 3.73 2.89 Title Transfer Facility (TTF) 51.85 53.76 12.49 16.04 7.49 Japan Korea Marker (JKM) 39.21 38.63 13.77 18.00 8.95 Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days Two-Week Total Forecast Current Day Prior Day Prior Year 10-Year 30-Year Norm Norm U.S. GFS HDDs 2 2 3 3 3 U.S. GFS CDDs 249 241 202 212 205 U.S. GFS TDDs 251 243 205 215 208 Refinitiv U.S. Weekly GFS Supply and Demand Forecasts Prior Week Current Week Next Week This Week Five-Year Last Year Average For Month U.S. Supply (bcfd) U.S. Lower 48 Dry Production 96.2 95.6 96.0 92.9 85.6 U.S. Imports from Canada 7.7 7.9 7.9 8.1 8.1 U.S. LNG Imports 0.0 0.0 0.0 0.0 0.1 Total U.S. Supply 103.9 103.6 103.9 101.0 93.8 U.S. Demand (bcfd) U.S. Exports to Canada 2.3 2.0 2.0 2.3 2.3 U.S. Exports to Mexico 6.0 6.2 6.1 6.7 5.2 U.S. LNG Exports 11.2 11.1 10.7 10.8 4.5 U.S. Commercial 4.3 4.3 4.4 4.4 4.4 U.S. Residential 3.5 3.5 3.5 3.5 3.6 U.S. Power Plant 41.1 43.7 44.8 38.0 39.6 U.S. Industrial 21.1 21.2 21.4 20.9 20.8 U.S. Plant Fuel 4.8 4.7 4.7 4.7 4.7 U.S. Pipe Distribution 2.0 2.1 2.2 2.0 2.0 U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1 Total U.S. Consumption 77.0 79.8 81.0 73.6 75.2 Total U.S. Demand 96.4 99.1 99.9 93.4 87.2 U.S. weekly power generation percent by fuel – EIA Week ended Week ended Week ended Week ended Week ended Jul 15 Jul 8 Jul 1 Jun 24 Jun 17 Wind 12 Solar 3 Hydro 7 Other 2 Petroleum 0 Natural Gas 38 Coal 20 Nuclear 17 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu) Hub Current Day Prior Day Henry Hub 6.68 6.81 Transco Z6 New York 5.97 6.22 PG&E Citygate 7.70 7.54 Dominion South 5.78 5.87 Chicago Citygate 6.47 6.39 Algonquin Citygate 6.11 6.34 SoCal Citygate 7.62 7.57 Waha Hub 6.35 6.32 AECO 3.95 3.43 SNL U.S. Power Next-Day Prices ($ per megawatt-hour) Hub Current Day New England 66.75 72.75 PJM West 93.25 102.75 Ercot North 231.50 280.00 Mid C 55.50 33.00 Palo Verde 85.25 76.50 SP-15 87.75 77.75 (Reporting by Scott DiSavino; Editing by Alison Williams)