U.S. natural gas futures fell about 3% to a one-month low on rising output in recent weeks, forecasts for less demand over the next two weeks than previously expected and an ongoing oversupply of gas in storage.

Analysts forecast there was still about 19% more gas in storage than usual for this time of year even though output reductions earlier in 2024 kept weekly injections below normal over the past seven weeks. 

That price decline came even though the heat wave blanketing much of the country for weeks will linger through at least mid-July, forcing power generators to continue burning lots of gas to keep air conditioners humming.

Front-month gas futures for August delivery on the New York Mercantile Exchange fell 6.5 cents, or 2.5%, to $2.536/MMBtu at 10:17 a.m. EDT, putting the contract on track for its lowest close since May 29.

Even though gas prices gained about 4% last week, speculators cut their net long futures and options positions on the New York Mercantile and Intercontinental Exchanges for the first time in three weeks, according to the U.S. Commodity Futures Trading Commission's Commitments of Traders report.

In Texas, the Electric Reliability Council of Texas (ERCOT), the power grid operator for most of the state, said peak demand came close but did not break the record for the month of June last week, as had been expected.

ERCOT, however, projects demand will break the July record on Tuesday as homes and businesses crank up their air conditioners to escape the heat blanketing the state.

In the Caribbean Sea, Hurricane Beryl was an extremely dangerous major hurricane expected to hit Jamaica on Wednesday and the Yucatan Peninsula in Mexico on June 28 before entering the Bay of Campeche in the Gulf of Mexico between Yucatan and the east coast of Mexico on June 29.

Supply and demand

Financial firm LSEG said gas output in the Lower 48 U.S. states rose to an average of 98.8 Bcf/d in June, up from a 25-month low of 98.1 Bcf/d in May. That compares with a monthly record high of 105.5 Bcf/d in December 2023.

Meteorologists projected weather across the Lower 48 states would remain hotter than normal through at least July 16.

With hotter weather expected next week, LSEG forecast average gas demand in the Lower 48, including exports, will rise from 99.8 Bcf/d this week to 105.8 Bcf/d next week. Those forecasts were lower than LSEG's outlook on June 28.

Gas flows to the seven big U.S. LNG export plants eased to 12.8 Bcf/d in June, down from 12.9 Bcf/d in May and a monthly record high of 14.7 Bcf/d in December 2023.

That decline was due to plant and pipeline maintenance at several facilities, including Freeport LNG and Cheniere Energy's Corpus Christi in Texas and Cameron LNG, Cheniere's Sabine Pass and Venture Global's Calcasieu Pass in Louisiana.

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