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U.S. natgas futures drop 5% on oil price plunge, record gas output

       Aug 1 (Reuters) - U.S. natural gas futures dropped about 5% to a near two-week low on Monday on a fall in
oil prices and an increase in gas output to record levels.
    That price drop came despite forecasts for hotter weather over the next two weeks than previously
expected, which should prompt power companies to burn more gas to keep air conditioners humming.
    Gas-fired plants have provided over 40% of U.S. power over the past several weeks, according to federal
energy data, even though gas futures soared about 52% in July in part because coal prices keep
hitting fresh record highs. That makes it uneconomic for some generators to use their coal-fired units.
    Also weighing on gas futures was the ongoing shutdown of the Freeport liquefied natural gas (LNG) export
plant in Texas which has left more gas in the United States for utilities to inject into what are currently
extremely low stockpiles.
    Freeport, the second-biggest U.S. LNG export plant, was consuming about 2 billion cubic feet per day
(bcfd) of gas before it shut on June 8. Freeport LNG estimated the facility will return to partial service in
October. Some analysts say the outage could last longer.
    Front-month gas futures for September delivery on the New York Mercantile Exchange (NYMEX) fell
40.1 cents, or 4.9%, to $7.828 per million British thermal units (mmBtu) at 9:12 a.m. EDT (1312 GMT), putting
the contract on track for its lowest close since July 19.
    Oil prices, meanwhile, dropped about 5% on Monday as weak manufacturing data from China and Japan
weighed on the demand outlook.
    Last week, gas speculators boosted their net short futures and options positions on the NYMEX and
Intercontinental Exchanges to the most since March 2020, according to the U.S. Commodity Futures Trading
Commission's Commitments of Traders report.
    So far this year, the front-month was up about 111% as much higher prices in Europe and Asia keep demand
for U.S. LNG exports strong, especially since the amount of gas flowing from Russia to Europe has dropped
following Moscow's invasion of Ukraine on Feb. 24.
    Gas was trading around $61 per mmBtu in Europe and $42 in Asia.
    The United States became the world's top LNG exporter during the first half of 2022. But no matter how
high global gas prices rise, the United States cannot export any more LNG because its plants were already
operating at full capacity.
    Russian gas exports on the three main lines into Germany - Nord Stream 1 (Russia-Germany), Yamal
(Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route - slid to 2.4
bcfd on Sunday from 2.5 bcfd on Saturday due to ongoing work on the Nord Stream pipe.
    That compares with an average of 2.8 bcfd in July 2022 and 10.4 bcfd in August 2021.

    TOP PRODUCER
    U.S. gas futures lag far behind global prices because the United States is the world's top producer, with
all the fuel it needs for domestic use, while capacity constraints limit LNG exports.
    Data provider Refinitiv said average gas output in the U.S. Lower 48 states jumped to a record 96.7 bcfd
in July from 95.7 bcfd in June. That compares with the prior all-time high of 96.1 bcfd in December 2021.
    On a daily basis, however, output was on track to drop 2.4 bcfd over the past few days to a preliminary
96.0 bcfd on Monday after soaring 2.4 bcfd to a daily record high of 98.4 bcfd on Friday. Preliminary data is
often changed later in the day.
    With hotter weather expected, Refinitiv projected average U.S. gas demand including exports would rise
from 99.7 bcfd this week to 100.7 bcfd next week. Those forecasts were higher than Refinitiv's outlook on
Friday.

                                              Week ended     Week ended     Year ago   Five-year
                                                Jul 29         Jul 22        Jul 29     average
                                              (Forecast)      (Actual)                   Jul 29
 U.S. weekly natgas storage change (bcf):         +30            +32          +16         +33
 U.S. total natgas in storage (bcf):             2,446          2,416        2,725       2,794
 U.S. total storage versus 5-year average       -12.5%         -12.5%


 Global Gas Benchmark Futures ($ per mmBtu)   Current Day     Prior Day    This Month  Prior Year   Five Year
                                                                           Last Year    Average      Average
                                                                                          2021     (2017-2021)
 Henry Hub                                       8.00           8.23          4.03        3.73        2.89
 Title Transfer Facility (TTF)                   59.73          57.96        15.43       16.04        7.49
 Japan Korea Marker (JKM)                        42.23          41.54        16.36       18.00        8.95


 Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days
 Two-Week Total Forecast                      Current Day     Prior Day    Prior Year   10-Year      30-Year
                                                                                          Norm        Norm
 U.S. GFS HDDs                                     2              3            1           3            4
 U.S. GFS CDDs                                    247            237          209         205          197
 U.S. GFS TDDs                                    249            240          210         208          201

 Refinitiv U.S. Weekly GFS Supply and Demand Forecasts
                                              Prior Week    Current Week   Next Week   This Week    Five-Year
                                                                                       Last Year   Average For
                                                                                                      Month
 U.S. Supply (bcfd)
 U.S. Lower 48 Dry Production                    96.8           97.8          97.9        93.7        86.5
 U.S. Imports from Canada                         8.2            8.2          8.3         7.9          8.0
 U.S. LNG Imports                                 0.0            0.0          0.0         0.0          0.1
 Total U.S. Supply                               104.9          106.0        106.2       101.6       xx93.8

 U.S. Demand (bcfd)
 U.S. Exports to Canada                           2.5            2.7          2.6         2.2          2.5
 U.S. Exports to Mexico                           6.0            5.8          6.1         6.4          5.4
 U.S. LNG Exports                                10.7           10.9          10.2        10.5         4.4
 U.S. Commercial                                  4.4            4.4          4.4         4.4          4.5
 U.S. Residential                                 3.6            3.5          3.5         3.5          3.4
 U.S. Power Plant                                43.9           44.0          44.7        37.0        38.8
 U.S. Industrial                                 21.3           21.4          21.4        20.9        21.2
 U.S. Plant Fuel                                  4.8            4.8          4.8         4.8          4.8
 U.S. Pipe Distribution                           2.1            2.1          2.2         2.1          2.1
 U.S. Vehicle Fuel                                0.1            0.1          0.1         0.1          0.1
 Total U.S. Consumption                          80.1           80.4          81.2        72.8        74.9
 Total U.S. Demand                               99.3           99.7         100.1        91.9        87.2


 U.S. weekly power generation percent by fuel - EIA
                                              Week ended     Week ended    Week ended  Week ended  Week ended
                                                Aug 5          Jul 29        Jul 22      Jul 15       Jul 8
 Wind                                              6              7            8           6            8
 Solar                                             3              3            3           3            4
 Hydro                                             6              5            6           6            6
 Other                                             2              2            2           2            2
 Petroleum                                         0              0            0           0            0
 Natural Gas                                      43             42            45          44          42
 Coal                                             22             22            22          21          21
 Nuclear                                          18             17            17          17          17


 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)
 Hub                                          Current Day     Prior Day
 Henry Hub 8.33           8.75
 Transco Z6 New York 7.83           7.70
 PG&E Citygate 9.27           9.49
 Dominion South 7.47           7.47
 Chicago Citygate 7.98           8.14
 Algonquin Citygate 7.92           7.80
 SoCal Citygate 9.18           8.71
 Waha Hub 7.77           7.95
 AECO 5.01           5.27

 SNL U.S. Power Next-Day Prices ($ per megawatt-hour)
 Hub                                          Current Day
 New England 80.00         109.25
 PJM West 90.00         108.50
 Ercot North 96.00         118.00
 Mid C 87.83         122.50
 Palo Verde 84.25         101.25
 SP-15 84.75         101.25

 (Reporting by Scott DiSavino; Editing by Chizu Nomiyama)



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