U.S. natural gas futures eased on Friday as muted trade ahead of a U.S. holiday weekend pulled prices off recent highs, with the market posting a second straight monthly loss on weaker-than-expected summer heat.
Front-month gas futures for October delivery on the New York Mercantile Exchange fell 0.3% to $2.93 per million British thermal units as of 10:33 a.m. EDT (1433 GMT). The contract touched its highest since August 11 in the prior session and is on track for an 9% weekly gain but a 5.3% monthly loss.
Financial markets will be closed on Monday for the Labor Day holiday.
“I think overall trade volumes are going to be relatively muted today in advance of the holiday in the U.S.; you’re not seeing folks take aggressive positions going into the long weekend. And so the bulls that drove us higher are covering a little bit. That’s probably what’s leading to the softening,” said Gary Cunningham, director of market research at Tradition Energy.
“Overall, we expected some very robust heat across the U.S. in July and August, and it really didn’t manifest. August ended up being a lot less impactful from a heat perspective, and now the outlooks for September are well off from what they were sixty days ago. That’s why we’re down for the month,” Cunningham added.
Financial firm LSEG estimated 149 cooling degree days over the next two weeks, higher than the 128 CDDs estimated on Thursday. The normal for this time of year is 128 CDDs. CDDs, which are used to estimate demand to cool homes and businesses, measure the number of degrees a day’s average temperature is above 65 degrees Fahrenheit (18 degrees Celsius).
“When you get a little heat in the South, people turn on their air conditioning. The short-term outlook and the longer-term outlook are both bullish,” said Phil Flynn, senior analyst for Price Futures Group.
“The longer-term outlook is looking very bullish. Demand for natural gas is bottoming out, and cheap prices will inspire more demand, which should give us a floor. Projections for a colder winter also provide longer-term support.”
Global demand for natural gas will rise more than 20% by 2050 from last year’s level, as it displaces coal to power industries and meet higher electricity use in developing countries, Exxon Mobil said on Thursday in an annual outlook.
The U.S. Energy Information Administration said on Thursday, energy firms added 18 billion cubic feet of gas into storage during the week ended August 22.
That was smaller than the 26-bcf build analysts forecast in a Reuters poll and compares with an increase of 35 bcf during the same week a year ago and a five-year (2020-2024) average build of 38 bcf for this time of year.
LSEG projected average gas demand in the Lower 48 states, including exports, would slightly rise from 103.6 bcfd this week to 104.3 bcfd next.
LSEG said average gas output in the Lower 48 states had risen to 108.5 bcfd so far in August, up from a record monthly high of 107.8 bcfd in July.
The average amount of gas flowing to the eight big U.S. LNG export plants has risen to 15.9 bcfd in August, up from 15.6 bcfd in July. That compares with a record monthly high of 16.0 bcfd in April.
In the tropics, the U.S. National Hurricane Center reported no disturbances in the Atlantic.
Source: Reuters
