U.S. Natural Gas Prices Drop as Production Surges and Storage Hits Record Levels

Louisiana (USA): In the final week of July, U.S. Natural Gas prices experienced a significant drop, settling at USD 2.124 per million British thermal units (mmBtu). This decrease was driven by rising output, ample inventories, and shifting demand dynamics.

Texas LNG, a subsidiary of Glenfarne Energy Transition, finalized a major tolling agreement for 50% of its future terminal’s LNG capacity. This move, which follows two earlier agreements with EQT, will enhance future capacity. Despite a 14% decline in the national rig count, rig productivity increased by 20%, contributing to lower prices. Operational efficiencies and fewer rigs led to a reduction of 2,000 jobs in Texas' upstream oil and Natural Gas sector in June. Glenfarne aims to develop one of the world's cleanest LNG export terminals, boosting the industry’s capacity and global reach.

Sources indicate that for the week ending July 12, 2024, U.S. crude oil production experienced a significant increase. Crude oil production surged to notable levels, reflecting a significant increase from the previous year. Texas crude oil production also rose to 5.6 million barrels per day in June, up 1.9% from the previous year. U.S. Natural Gas production increased, with both marketed output and Texas production showing a 1.7% rise year-over-year. Despite these increases and forecasts of hotter weather driving up demand, Natural Gas futures for August delivery dropped by 2.6% to USD 2.192 per mmBtu. Gas production in the Lower 48 states rose in July compared to June, reflecting a steady increase in output.

Additionally, U.S. power plants generated 6.9 million megawatt-hours of electricity from Natural Gas due to high temperatures and reduced wind. Natural Gas injections into storage since April 1 totaled 950 billion cubic feet, 15% below the five-year average. Despite the overall trends, the Henry Hub spot Natural Gas price saw a slight increase, and the August 2024 NYMEX contract rose modestly. LNG deliveries and exports grew, with 21 vessels departing U.S. ports between July 18 and 24, carrying 79 billion cubic feet of LNG.

Meanwhile, Freight rates on major Asia-to-U.S. and Asia-to-Europe routes decreased by 1% to 4% last week, suggesting easing after previous increases. Despite ongoing congestion and regional disruptions, added capacity and early peak season shipments are stabilizing rates, which remain high compared to pre-pandemic levels.

Overall, the decline in U.S. Natural Gas prices in late July reflects increased production, oversupply, and efficient market dynamics. Although prices have dropped, the sector remains resilient with significant productivity gains and higher output. Looking ahead, Natural Gas demand is anticipated to increase due to expected hot weather in August, which could help stabilize prices. Ongoing infrastructure developments and strategic partnerships are poised to further enhance the industry’s capacity and global reach.