US Natural Gas Futures Fall Amid Steady Temperatures and Strong Production

US natural gas futures decreased by 2.5% on Monday after an extended Fourth of July holiday weekend, as forecasts indicated steady, near-normal temperatures in the lower 48 US states, keeping cooling demand moderate. Amidst ample supplies and weak demand, next-day gas and power prices in several states reached record lows. Meanwhile, power generators continued to burn gas due to its relatively low cost compared to coal.

Key Takeaways:

• US natural gas futures fell 2.5% on Monday, with front-month gas futures on the New York Mercantile Exchange dropping 7.2 cents to $2.75 per million British thermal units at 8:40 am EDT.
• The Global Forecast System weather model projected mostly steady, near-normal temperatures over the next two weeks, with 197 population-weighted cooling degree days.
• Residential, commercial, and industrial customers used near-normal amounts of gas for this time of year, but power generators continued to burn more due to its relatively low cost compared to coal.
• Power generators were expected to use an average of 31.7 billion cubic feet per day (bcfd) of gas over the next two weeks, compared to 26.2 bcfd a year earlier and a 30-year norm of 28.9 bcfd.
• Coal futures were near a 2007 low, making it more likely that some generators will burn coal instead of gas, which has a premium of over $1 per mmBtu for a 19th consecutive day.
• Net imports from Canada were expected to rise to 5.5 bcfd on Monday from 5.3 bcfd on Thursday, while exports to Mexico will ease to 2.6 bcfd on Monday from 2.7 bcfd on Thursday.
• Production in the lower 48 states was expected to ease to 73.3 bcfd on Monday from 73.9 bcfd on Thursday, but has trended higher over the last week or so, reaching a record high of 74.5 bcfd in December.
• Analysts estimated that utilities added 85 billion cubic feet of gas into storage during the week ended July 3.

Statistics:

• US natural gas futures fell 2.5% on Monday, with a 7.2 cent drop to $2.75 per million British thermal units.
• Forecasted population-weighted cooling degree days (CDDs) for the next two weeks: 197.
• Average gas consumption in the lower 48 US states over the next two weeks: 59.7 billion cubic feet per day (bcfd).
• Power generators' projected gas consumption over the next two weeks: 31.7 bcfd.
• Coal futures near a 2007 low, with a premium of over $1 per mmBtu for a 19th consecutive day.
• Net imports from Canada on Monday: 5.5 bcfd.
• Exports to Mexico on Monday: 2.6 bcfd.
• Production in the lower 48 states on Monday: 73.3 bcfd.
• Record high production in December: 74.5 bcfd.

Sources:

• Thomson Reuters Analytics
• Global Forecast System weather model
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