Houston — The NYMEX October natural gas futures contract dropped 9.3 cents Tuesday, as record US production over the weekend put pressure on the market.
The front-month contract settled at $2.823/MMBtu Tuesday after trading in a range of $2.812-$2.904/MMBtu.
US dry gas production reached a record high over the long Labor Day weekend, increasing to 83.4 Bcf Sunday. It is expected to decrease to 82.5 Bcf Tuesday, according to S&P Global Platts Analytics.
Total demand -- including exports to Mexico and LNG exports -- is set to decrease 700 MMcf day on day to 75.8 Bcf on Tuesday. Deliveries to the Sabine Pass terminal drove the US drop, falling close to 600 MMcf/d, according to Platts Analytics.
Overall, the supply-demand gap has widened recenly as record production continues and demand backs off. This could possibly drive storage injections higher as summer months come to an end.
The bearish sentiment continued Tuesday, with the power burn total in the Midwest falling 251 MMcf to 3.04 Bcf, according to Platts Analytics.
Looking ahead, the NYMEX winter strip averaged about $2.961/MMBtu on Tuesday as the market does not seem bothered by the storage deficit going into the winter months and as strong production seems to be deemed sufficient to take care of approaching demand.
All the bearish factors hampered the market, as the front-month contract reached its lowest level since the beginning of August. The front-month contract has not broken $3/MMBtu since June 15 as strong gas production has kept a lid on the market.
Looking ahead, the most recent six- to 10-day forecast from the US National Weather Service calls for higher-than-average temperatures for much of the country, excluding the Pacific Northwest, which is likely to boost the market.
The NYMEX settlement price is considered preliminary and subject to change until a final settlement price is posted at 7 pm EDT (2300 GMT).
