U.S. natural gas futures fell about 3% on Friday on forecasts for cooler weather and lower demand next week than previously expected. That price decline came even though output was on track to fall for a fourth day in a row on Friday after hitting a record high on Monday, and despite forecasts for hotter weather in late August.
Also weighing on prices was the ongoing outage at the Freeport liquefied natural gas (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 billion cubic feet per day (bcfd) 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 were down 28.4 cents, or 3.2%, to $8.590 per million British thermal units (mmBtu) at 8:12 a.m. EDT (1212 GMT).
On Thursday, the contract jumped about 8% to close at its highest since July 26 on news that Freeport was pulling in some pipeline gas. Freeport said it had been pulling in small amounts of pipeline gas since mid July to fuel a power plant that is generating electricity for sale to the Texas grid.
For the week, the contract was on track to gain about 6% after sliding 2% last week. So far this year, the front-month is up about 130%, as higher prices in Europe and Asia keep demand for U.S. LNG exports strong.
Global prices have soared this year following supply disruption and concerns of shortages linked to Russia's invasion of Ukraine on Feb. 24. Gas was trading around $62 per 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 are already operating at full capacity.
The average amount of 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 - has slid to 2.5 bcfd so far in August, down from 2.8 bcfd in July and 10.4 bcfd in August 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 prevent the country from exporting more LNG.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states had risen to 97.6 bcfd so far in August from a record 96.7 bcfd in July.
On a daily basis, however, output has declined every day since hitting a record 98.3 bcfd on Monday, sliding to a preliminary 95.6 bcfd on Friday. Preliminary data is often revised. Refinitiv projected average U.S. gas demand, including exports, would fall from 101.9 bcfd this week to 96.9 bcfd next week as the weather turns cooler before rising to 98.1 bcfd in two weeks as some heat returns.
The forecast for next week was lower than Refinitiv's outlook on Thursday. The average amount of gas flowing to U.S. LNG export plants has held at 10.9 bcfd so far in August, the same as July. That compares with a monthly record of 12.9 bcfd in March. The seven big U.S. export plants can turn about 13.8 bcfd of gas into LNG.
(Reporting by Scott DiSavino, Editing by Mark Potter)