US natural gas prices remain under pressure despite intense summer heat, as resilient production, ample inventories and reduced liquefied natural gas exports continue to outweigh stronger seasonal demand, RBC Capital Markets strategists said in a note Friday.
RBC analysts said gas balances have stayed unexpectedly loose even as elevated temperatures boost electricity demand for air conditioning, with storage continuing to build at a pace that exceeds market expectations.
The US Energy Information Administration reported a 41 billion cubic foot injection into underground storage for the latest week, slightly above analysts' consensus estimate of 39 Bcf.
The build followed a 61 Bcf increase the previous week, lifting total working gas inventories to 3.024 trillion cubic feet, or about 6.4% above the five-year seasonal average.
RBC said the inventory surplus underscores the market's struggle to absorb abundant domestic production at a time when LNG export demand has temporarily weakened.
The pressure has been compounded by planned maintenance at Freeport LNG, one of the largest US export terminals.
RBC said that since maintenance began last week, feedgas deliveries to the facility have fallen by an average of about 648 million cubic feet per day, reducing export demand through late August.
Weather forecasts continue to point to elevated air-conditioning demand. RBC said cooling degree days are expected to remain about 37 above the 10-year average through the end of July.
However, recent heat waves have not been intense enough to significantly tighten supply-demand balances, leaving natural gas prices under pressure.
Meanwhile, RBC said policy developments affecting electricity demand are emerging as another area of focus for energy markets.
New York Governor Kathy Hochul this week signed an executive order temporarily halting new data center development for one year while the state develops a regulatory framework to assess the facilities' economic and environmental impacts.
The directive coincides with the Federal Energy Regulatory Commission's requirement that regional grid operators address the impact of large electricity loads on transmission systems and interconnection processes.
RBC said the New York moratorium is unlikely to alter the broader US data center investment outlook because the state accounts for a relatively small share of planned capacity.
Large-load requests in New York total about 12 gigawatts, compared with over 400 GW in Texas.
The research firm projected that instead, investors are likely to focus on responses due in August to the FERC'S June order requiring regional grid operators to address the impact of large electricity loads.