Natural gas futures fell on Tuesday after mid-range heat forecasts eased slightly and new outlooks predicted record production on the horizon, ending a rally that had been fueled by the scorching summer heat. The August Nymex gas futures contract settled at $7.264/MMBtu, down 21.5 cents per day. September fell 23.2 cents to $7,150.
In short :
- Cooling degree days decrease slightly
- Forecast of calls for a record release
- Europe’s heat wave adds a wrinkle
The fast month had gained nearly 88 cents in the previous two regular trading sessions amid widespread high temperatures in the 90s and 100s.
NGI’s Spot Gas National Avg. surged ahead on Tuesday, rising 18.5 cents to $7,930 after stronger gains in recent days.
“Overnight data fell slightly on the amount of heat in the northern United States for the seven- to 15-day period,” NatGasWeather said Tuesday.
US and European weather models lost three cooling degree days (CDD). Still, intense heat is expected to permeate most of the Lower 48 through July and into next month, the firm said.
“Weather data would have to lose many more ‘CSDs’ to avoid a strong bullish weather sentiment considering that the national 15-day accumulated CDDs are still more than 50 degrees warmer than normal,” NatGasWeather said.
Meanwhile, analysts at Rystad Energy said in a report on Tuesday that they expect U.S. natural gas production to hit a record high in the coming months, topping 100 billion cubic feet per day and helping to meet robust global demand amid scorching summer temperatures and supply shortages. in Europe.
Rystad noted that demand fueled price spikes and galvanized growers in the Haynesville and Appalachian regions to invest in growth. This goes hand-in-hand with expected increases in associated Permian Basin gas volumes, the company said.
Rystad’s projection exceeds the official growth forecast of the US Energy Information Administration (EIA). The agency called for production close to 100 billion cubic feet per day in 2023.
Production estimated by the EIA would average 96.2 billion cubic feet per day for the year 2022, a 3% year-over-year increase.
“Already the world’s largest gas producer, the United States is poised to further increase production to meet global demand, but take-out constraints pose a serious risk,” said Rystad senior analyst Kristine Vassbotn.
Notably, the Freeport LNG outage following a fire in early June reduced US export capacity by at least about 2.0 Bcf/d by early fall. This affects in particular the ability of US exporters to meet European demand for liquefied natural gas. Calls from Europe are robust amid Russia’s war in Ukraine due to efforts on the continent to minimize dependence on Kremlin-backed gas.
Europe is also struggling with exceptional heat waves in July, which aggravates the problems of imbalance between supply and demand.
U.S. LNG export volumes held comfortably above 11,100,000 cfd throughout July, allowing U.S. facilities, with the exception of Freeport, to operate near full ability.
In the short term, however, production proved unstable.
U.S. production estimates from Wood Mackenzie on Tuesday showed a decline of about 2.1 billion cubic feet per day, with total production down to about 95.4 billion cubic feet per day.
However, the decline also reflects an upward revision of around 1.4 Bcf/d from the previous day’s estimate, Wood Mackenzie analyst Laura Munder noted, and a boost in production is expected soon.
“The decline is concentrated in the northeast, down about 1.1 cfd to about 33.9 109 cfd,” including declines of about 385 MMcf/d in the southwest Pennsylvania, 360 MMcf/d in northeastern Pennsylvania, 195 MMcf/d in Ohio and 175 MMcf/d in West Virginia, Munder said.
The lower production coincides with various near-term pipeline maintenance events in the region, according to the analyst, and upward revisions “are expected” this week.
Spot prices maintain momentum
Physical gas prices rose again on Tuesday – though not as much as Monday’s surge of $1.145 – as Eastern hubs continued to accelerate.
Cove Point jumped $1,940 day/day to an average of $12,760, and PNGTS jumped $2,575 to $13,755 to help lead the charge.
Data from the National Weather Service (NWS) showed warm high pressure covering much of the western and central United States early this week, with forecasts calling for such conditions to extend eastward. is over the next few days.
Temperatures are forecast to be hottest in the deserts of the Southwest and parts of Texas – sometimes approaching or eclipsing 110 degrees – but highs in the 90s or higher are expected to cover the plains, the Midwest and much of the is this week, according to the NWS forecast.
AccuWeather’s Alex Sosnowski, senior meteorologist, noted that the northeastern U.S. Interstate 95 corridor largely escaped the worst of July’s heat. But that should change.
[Want today’s Henry Hub, Houston Ship Channel and Chicago Citygate prices? Check out NGI’s daily natural gas price snapshot now.]
“The heat from the building will bring an extended range of 90-degree temperatures to several major cities that haven’t seen many extended heat waves so far this summer,” Sosnowski said, including major markets such as Philadelphia. , New York and Boston.
He said the jet stream’s pattern helps shield the northeast from the 100-degree heat spells that have affected much of the lower 48 and, more recently, western Europe.
Still, “locations in the Interstate 95 corridor from Virginia to Massachusetts will significantly increase their number of 90-degree days this week and possibly into next week,” Sosnowski said. “Temperatures will average 5 to 10 degrees above normal, following near-average temperatures for most days since early June.”
This would add to the production success in the region this week.
In the Northeast, Algonquin Citygate climbed $1,320 to $9,370, while Tenn Zone 6 200L rose $1,750 to $9,690 and Transco Zone 6 NY gained $1,155 to $8,915.
