US natgas prices hold near 21-week high supported by heat, new pipeline weighs

U.S. natural gas futures held near a 21-week high on Monday, supported by hot weather this week which should boost demand for air conditioning, but pressured by expectations that gas supplies will soon rise with the giant Mountain Valley Pipeline nearing completion.

Gas futures were trading up by more than 5% but retreated after Mountain Valley Pipeline said the project from West Virginia to Virginia was "mechanically complete" and being "packed with gas". The company sought permission from the U.S. Federal Energy Regulatory Commission (FERC), to place the project into service by Tuesday, June 11.

Analysts predicted FERC would probably authorize the project but not necessarily by Tuesday.

Front-month gas futures NG1! for July delivery on the New York Mercantile Exchange fell 1.2 cents to settle at $2.906 per million British thermal units. On Friday, the contract closed at its highest level since Jan. 12.

Traders said futures prices were also pressured by small increases in output in recent weeks and the tremendous oversupply of gas still in storage.

Analysts said current gas stockpiles were still around 24% above normal levels for this time of year.

SUPPLY AND DEMAND

LSEG said gas output in the Lower 48 U.S. states has slipped to an average of 98.0 billion cubic feet per day (bcfd) so far in June, down from 98.1 bcfd in May. That compares with a monthly record of 105.5 bcfd in December 2023.

On a daily basis, output was on track to slide by around 0.5 bcfd to a preliminary three-week low of 97.2 bcfd on Monday, down from 97.7 bcfd on Sunday. That output, however, was up about 0.6 bcfd from a 15-week low of 96.5 bcfd on May 1.

Analysts said the increase since May 1 was a sign producers were slowly boosting output following the 47% jump in futures prices in April and May. Output hit a six-week high of 99.5 bcfd on May 24.

Overall, U.S. gas production remained down around 8% so far in 2024 after several energy firms, including EQT EQT and Chesapeake Energy CCHK, delayed well completions and cut drilling activities when prices fell in February and March.

Meteorologists projected weather across the Lower 48 states would remain mostly warmer than normal through June 25 except for some near-normal days from June 10-12.

LSEG forecast gas demand in the Lower 48, including exports, would jump from 95.1 bcfd this week to 99.2 bcfd next week. The forecast for this week was higher than LSEG's outlook on Friday.

Gas flows to the seven big U.S. LNG export plants have risen to 13.1 bcfd so far in June, up from 12.9 bcfd in May.

That, however, remains well below the monthly record high of 14.7 bcfd in December 2023 due to ongoing maintenance at several plants, including Cheniere Energy's LNG Sabine Pass and Venture Global's Calcasieu Pass in Louisiana.