US natgas prices edge up to 3-week high as output declines

By Scott DiSavino

U.S. natural gas futures edged up about 1% to a three-week high on Tuesday as a drop in output in recent weeks offset forecasts for less demand and lower gas flows to liquefied natural gas (LNG) export plants over the next two weeks.

Gas futures NG1! for July delivery on the New York Mercantile Exchange rose 2.8 cents, or 0.8%, to settle at $3.722 per million British thermal units, their highest close since May 9 for a second day in a row.

In Canada, where wildfires were raging across the country, spot gas prices at the AECO hub (NG-ASH-ALB-SNL) in Alberta fell to an eight-month low of just 6.3 cents per mmBtu in a sign that gas was trapped in the nation's biggest gas-producing province.

That compares with average AECO prices of $1.41 per mmBtu so far this year, 96 cents in 2024 and $2.28 over the prior five years (2019-2023).

Financial firm LSEG said average gas output in the Lower 48 U.S. states fell to 104.0 billion cubic feet per day so far in June, down 105.2 bcfd in May and a monthly record high of 106.3 bcfd in March.

On a daily basis, output was on track to drop to a preliminary three-month low of 102.9 bcfd on Tuesday, down from a 104.3 bcfd on Monday and an average of 105.3 bcfd over the prior seven days. Analysts noted preliminary data was often revised later in the day.

Energy traders said output reductions over the past month or so were primarily due to normal spring maintenance on gas pipelines. Energy firms usually work on gas pipes and other equipment in the spring and autumn when demand for the fuel for heating and cooling is low.

But, some analysts also noted that gas output could also be down as several energy firms cut spending on oil drilling due to a 13% decline in oil prices CL1! so far this year. That drop in oil drilling also reduces the amount of gas pulled out of the ground associated with that oil production.

About 37% of U.S. gas production comes from associated gas, according to federal energy data.

LSEG forecast average gas demand in the Lower 48, including exports, will rise from 95.7 bcfd this week to 98.2 bcfd next week. Those forecasts were lower than LSEG's outlook on Monday.

The average amount of gas flowing to the eight big LNG export plants operating in the U.S. fell to 13.8 bcfd so far in June, down from 15.0 bcfd in May and a monthly record high of 16.0 bcfd in April.

Energy traders said LNG feedgas reductions over the past month or so were primarily due to normal spring maintenance, including work at Cheniere Energy's LNG plants.

Gas flows to Cheniere's 4.5-bcfd Sabine Pass in Louisiana have held at a 23-month low of around 3.1 bcfd since May 31, down from an average of 4.3 bcfd over the prior seven days, while feedgas to the company's 3.9-bcfd Corpus Christi in Texas was on track to drop to a two-week low of 1.5 bcfd on Tuesday, down from a recent average of 2.1 bcfd from May 26-June 1.

Analysts have noted that gas flows to Sabine would likely remain reduced for about three weeks of maintenance from around May 31-June 22.