July natural gas futures moved decidedly lower in early trading Wednesday as the market took profits ahead of the contract’s expiration at the close of business.
The prompt month contract was down 5.1 cents to $2.705/MMBtu at 8:50 a.m. ET. August was down 5.4 cents to $2.809.
Futures appeared to be caught between supply concerns and questionable demand-side factors, including soft LNG exports and strong cooling demand.
On the supply side, the return of natural gas production continued to sap support as concerns persisted over end-of-season natural gas inventories. Production has averaged above 100 Bcf/d for the last 30 days, according to Wood Mackenzie data. The firm estimated production at 99.8 Bcf/d on Wednesday.
The market is awaiting the release on Thursday of the latest storage data for signals of a tighter supply/demand balance. The U.S. Energy Information Administration (EIA) is expected to show a seasonally light injection because of the intense heat in mid-June.
NGI modeled a 54 Bcf increase for the week ended June 21, below both the five-year average injection of 85 Bcf and the year-ago build of 81 Bcf.
Total Lower 48 working gas in underground storage in the previous EIA report stood at 516 Bcf, or a 23% surplus to the five-year average. That’s down from about 35% in late April.
The latest weather outlooks maintained excessive heat for much of the southern two-thirds of the country. Temperatures were forecast to reach the 90s and 100s through the next two weeks, supporting “strong to very strong national” demand, according to NatGasWeather. The firm said “nice to warm” weather, with temperatures in the 70s and 80s, was likely in the county’s northern third.
The long-range weather data has consistently favored a hotter-than-normal U.S. weather pattern holding through mid-July “to keep weather sentiment to the bullish side,” NatGasWeather said.
Soft liquefied natural gas exports countered the supportive weather-related demand. Wood Mackenzie data showed feed gas flows to export facilities slipped to 12.0 Bcf/d in the last week.
All eyes were on the LNG market amid a bevy of news.
Canada’s 0.5 Bcf/d Cedar LNG Partners LP facility made a final investment decision (FID), with planned in-service by late 2028.
Meanwhile, Venture Global Plaquemines LNG LLC received approval to expand its peak capacity by 0.6 Bcf/d, and its Calcasieu Pass 2 (CP2) project is on FERC’s docket this week.
Additionally, Cheniere Energy, Inc. remains on track to take FID on Corpus Christi LNG trains 8 and 9 later this week.
“Still, outside of Cheniere, continued troubles in bringing massive infrastructure projects online highlights the risk of timelines slipping to delay incoming demand for natural gas,” EBW Analytics Group analyst Eli Rubin said.
