Natural gas futures traders on Tuesday took profits and snapped a winning streak after the prompt month had rallied nearly 20 cents over the three prior sessions.
At A Glance:
- Cooling demand proves choppy
- Production estimated at 101 Bcf/d
- Seasonally small injection likely
The August Nymex gas futures contract settled at $2.187/MMBtu, down 6.4 cents day/day.
NGI’s Spot Gas National Avg. ticked up 2.5 cents to $1.885.
Fundamentals on Tuesday changed little from the prior session. If anything, they drew a step closer to an expected return of far-reaching heat forecast to get air conditioners cranking nationally.
Weather models maintained expectations for seasonally moderate temperatures this week across much of the central and eastern United States – following heat waves earlier in the month. Still, a return to scorching highs held in forecasts for the end of this month and the first half of August, according to the National Weather Service (NWS). Highs in the upper 80s to 100s could canvass much of the Lower 48.
Feed gas demand from export terminals, meanwhile, topped 12 Bcf/d on Tuesday, according to Wood Mackenzie. That was up notably from July lows close to 10 Bcf/d and reflected in large part the ongoing restart of Freeport LNG Development LP after former Hurricane Beryl earlier this month temporarily idled the facility.
At the same time, production held steady at slightly above 101 Bcf/d, according to Wood Mackenzie’s Tuesday estimate. That was essentially in-line with the seven-day and 30-day averages.
Head trader Mike Matousek of U.S. Global Investors said producers were optimistic about long-term energy needs. This is why output climbed from spring lows in the mid-90s Bcf.
In addition to traditional domestic consumption, he highlighted the rise of artificial intelligence and mounting electricity consumption, as well as a looming surge in liquefied natural gas demand. Multiple LNG facilities are in the works along the Gulf Coast to feed expected increases in export demand through this decade. Production, however, is hovering around the century mark for now because of caution linked to the ample supplies in storage that have contained prices much of this year.
RBN Energy LLC analysts echoed that thinking. “So far, 2024 has been a disappointment for natural gas prices,” they said. “Nevertheless, the 2025 forward curve remains relatively resilient,” with December 2025 prices recently topping the $4.00 level. “The takeaway is that regardless of current oversupplies, the market continues to anticipate tighter market conditions in 2025 as new LNG export capacity comes online.”
Inventories And Policy
For Thursday’s U.S. Energy Information Administration (EIA) inventory print, covering the week ended July 19, NGI modeled a modest 11 Bcf increase. That compares bullishly with a five-year average build of 31 Bcf.
Preliminary injection estimates submitted to Reuters ranged from 15 Bcf to 66 Bcf, with an average of 24 Bcf.
EIA reported an injection of 10 Bcf into storage for the week ended July 12. That was far from the five-year average increase of 49 Bcf. The anemic result reflected lofty and widespread high temperatures during the week. Those conditions spilled into the July 19 period.
While the storage surplus to the five-year average stood at 17%, that figure was less than half of where it was in March following a mild winter. Stocks were at 3,209 Bcf after the last EIA report.
Meanwhile, on the policy front, President Biden’s decision over the weekend to end his bid for re-election appeared to have little impact on energy commodity trading early this week, according to Rystad Energy analyst Claudio Galimberti.
Biden endorsed Vice President Kamala Harris, “and after all state party chairs have endorsed her bid, she seems the most likely candidate to earn the Democratic presidential nomination,” he added.
“Although no official campaign policies have been released by Harris, her energy policy would likely closely resemble that of the current administration, including a continuation of the Inflation Reduction Act,” Galimberti said. “Harris, however, may choose to take a more centrist position on fossil fuels to win over more moderate votes. If that comes to pass, she will have to defend her track record as California’s attorney general, where she brought lawsuits against oil and gas companies about climate change.”
Cash Prices
Spot gas prices varied by region but mostly traded in narrow ranges of gains and losses as market participants weighed softer near-term demand against looming heat.
Chicago Citygate gained a penny day/day to average $1.830, while Algonquin Citygate near Boston picked up 1.0 cent to $1.745. Out West, SoCal Citygate gained 6.0 cents to $2.860.
AccuWeather meteorologist Bill Deger noted that the Southeast, in particular, could see a substantial easing in summer temperatures this week. “Clusters of showers and thunderstorms will visit most areas at least once per day through late week, especially amid daytime heating in the midday through evening hours.”
This means the mercury could “fall well short of 90 in most spots, most days. Such high temperatures are several degrees below the historical average for late July, which is climatologically the hottest period of the year,” Deger said.
Florida Gas Zone 3 shed 2.0 cents on Tuesday to $2.485.
While NWS data showed cooling weather systems also peppering other portions of the East, Midwest and Southern Plains this week and early next to curb national demand to around average levels, forecasts continued to call for intense near-term heat across swaths of the South and West. Lofty highs from the upper 80s and higher were anticipated for a majority of the Lower 48 moving into August.
Wood Mackenzie noted that, starting Monday and continuing indefinitely, El Paso Natural Gas Co. LLC declared two force majeures in the Permian Basin at its Lincoln and Caprock compressor stations because of equipment failure. This created temporary but likely modest limits on westbound flows this week, the firm said.
The firm is watching the work closely because protracted maintenance events have on multiple occasions this year backed up supplies and pummeled Permian benchmark Waha prices. The hub on Tuesday gained 10.0 cents to 48.0 cents.
