US Natgas Prices Rise on Strong LNG Demand

US natural gas prices rose more than 4% to $2.785 per MMBtu on Monday, supported by stronger demand from liquefied natural gas (LNG) export facilities. Daily flows to the nine major US LNG export plants were on track to reach a one-month high of 17.9 bcfd. Also, average feedgas demand stood at 17.2 bcfd in July, just below June’s monthly record of 17.4 bcfd. Meanwhile, natural gas production in the Lower 48 states averaged a record 111.2 bcfd in August, up from 110.7 bcfd in July. Strong output and relatively mild weather earlier this year have kept inventories above the five-year average since March. Analysts expect the storage surplus to narrow slightly to 6.6% above normal for the week ending August 7. However, forecasts point to continued above-normal temperatures through August 25, which should sustain gas demand from power generators as air-conditioning use remains elevated.

US natural gas prices hovered below $2.70 per MMBtu, near the lowest level since April, pressured by a larger-than-expected build-up in storage. The EIA report showed energy firms injected 33 bcf of gas into storage in the week ended July 31, exceeding forecasts of a 31 bcf increase, last year’s 13 bcf build, and the five-year average rise of 23 bcf. On top of that, production remained near record highs despite a slight easing, with Lower 48 dry gas output averaging 110.6 bcfd so far in August, compared with a record 110.7 bcfd in July. LNG feedgas demand also continued to weaken, with average flows to the nine major LNG export plants falling to 16.9 bcfd so far this month from 17.2 bcfd in July, due partly to reduced operations at Freeport LNG in Texas and the single operating liquefaction train at Golden Pass. These factors more than offset support from expectations of higher weather-driven demand, with forecasts pointing to mostly above-normal temperatures through August 21.

US natural gas prices declined below $2.7 per MMBtu, reaching their lowest level in more than three months, as expectations for weaker demand and milder weather weighed on the market. Forecasts pointed to moderating temperatures across much of the country in the coming weeks, reducing the likelihood of a significant increase in gas consumption. Prices have also been pressured by record production levels and ample inventories, with storage volumes remaining above the five-year average since March due to strong output and mild spring conditions. Analysts expect inventories to stand around 6.6% above normal for the week ended July 31. US Lower 48 gas production averaged a record 110.7 billion cubic feet per day in July, while flows to major LNG export facilities declined due to maintenance disruptions. Meanwhile, improving prospects for a US-Iran agreement and potential reopening of the Strait of Hormuz further reduced energy market concerns and added downward pressure on prices.