(Bloomberg) -- Natural gas futures slid toward $2 per million British thermal units, a level that hasn't been breached in three years, as the largest U.S. export facility undergoes maintenance and summer heat fades, leaving the market struggling to absorb a barrage of supply from shale basins.
Temperatures may be mostly normal in the Lower 48 through the middle of August, according to Commodity Weather Group LLC. Planned work on Cheniere Energy Inc.'s Sabine Pass export terminal in Louisiana, meanwhile, is limiting a key outlet for gas producers. Flows to the facility dropped 36% from Friday.
Gas was also pressured lower by a broader decline in energy and agricultural commodities as the U.S.-China trade war escalated, with Beijing responding to President Donald Trump's tariff threat by letting the yuan tumble to the weakest level in more than a decade. Shares of gas drillers fell alongside the broader market, with Southwestern Energy Co. slipping as much as 6.3% and Range Resources Corp. down as much as 7.4%.
Though U.S. gas exports have climbed to a record and power plants are burning more of the fuel than ever, the demand boost has been no match for soaring output from shale basins. Underground gas storage is filling up at a faster pace as the weather cools, erasing concern that a supply crunch will emerge during the winter heating season. Hedge funds' bearish bets on gas have climbed to the highest in three years.
”We haven't had any kind of sustainable hot weather this summer to give the market some backbone,” said Thomas Saal, senior vice president of energy trading at FCStone Latin America in Miami. “You have these LNG facilities that can move the market around. The funds continue to aggressively sell the market, so until they hit something we are going to keep falling.”
Gas for Sept. delivery fell 8.8 cents, or 4.2%, to $2.033 per million Btu at 9:26 a.m. on the New York Mercantile Exchange. Futures earlier dropped to $2.029, the lowest since May 26, 2016. The premium for March gas over April reached 14.4 cents after trading as low as 14.3 cents on Friday.
--With assistance from Christine Buurma.
To contact the reporter on this story: Naureen S. Malik in New York at nmalik28@bloomberg.net
To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Christine Buurma, Reg Gale
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