Natural gas futures moved lower in early trading Tuesday as production levels ticked higher to undercut bullish sentiment from a post-Hurricane Beryl recovery in LNG exports.
Coming off a 12.3-cent bounce Monday, the August Nymex contract was down 4.6 cents to $2.204/MMBtu at 8:44 a.m. ET. The contract in early trading was as low as $2.195.
Relatively high gas inventories in Lower 48 underground storage remain a headwind for the market, even as demand picks up, according to EBW Analytics Group’s Eli Rubin, senior analyst.
“We are cautious about the durability of any near-term rebound,” with North American gas surpluses 684 Bcf above normal and gas production robust, Rubin said.
Lower 48 gas production levels have creeped above the 102 Bcf/d level. Output on Monday was revised higher to 102.2 Bcf/d, according to Wood Mackenzie data. Early cycle readings for Tuesday were at 101.3 Bcf/d.
Monday’s pace was in line with production gains for July. In the first half of the month, production averaged 102.2 Bcf/d, up by 2.1 Bcf/d from the June average, according to London Stock Exchange’s Ziya Cologlu, senior analyst.
“The ramp-up in production has definitely been the main market mover lately,” Cologlu said on the online energy platform Enelyst.
Further adding to supply, Canadian gas imports since Monday have increased above the 6 Bcf/d level, Wood Mackenzie data show. Maintenance constrained flows through the Gas Transmission Northwest (GTN) Kingsgate along the U.S./Canadian border. GTN on Monday said the potential for reduced flows would remain high for another week.
For bulls, early cycle flow data showed U.S. feed gas demand for liquefied natural gas exports rose 0.5 Bcf/d day/day to 12.1 Bcf/d on Tuesday, according to Wood Mackenzie.
Nominations were higher to Cheniere Energy Inc.’s Corpus Christi LNG terminal in South Texas, the firm said. Flows to the terminal had been running below 1.6 Bcf/d during maintenance work on a feeder pipeline, which ended Monday.
The gains build further on a rebound in feed gas flows on Monday to the Freeport LNG facility in Texas, which eased fears about a prolonged outage.
Weather model updates overnight showed modest changes, according to NatGasWeather.
National demand for gas was expected to hold near moderate to high levels over the next five days as weather systems moved across the country, the firm said. The eight- to 15-day forecast period favored strong upper high pressure expanding across most of the United States to increase demand to strong levels, it said.
