US natgas prices fall to two-week low while Southern California electricity prices surge to near two-year highs

⑴ US natural gas futures came under pressure and fell by about 2% to a two-week low on Wednesday, with the main October contract closing at $2.845 per million British thermal units—the lowest settlement since August 26—mainly due to record-high production, ample inventories, and downwardly revised demand expectations. ⑵ Since September, average daily production in the contiguous 48 US states has risen to 11.35 billion cubic feet, surpassing August's record monthly high. Coupled with mild weather since spring keeping inventories above the five-year average since March, supply-side pressure remains evident. ⑶ However, high temperatures in the western US continue to boost local electricity demand. The spot electricity price at Southern California's SP-15 node soared to $84 per megawatt hour—more than 2.8 times the annual average and the highest since July 2024—as surging air conditioning loads keep gas-fired power consumption elevated. ⑷ Weather forecasts indicate that warmer-than-normal conditions will persist until late September, providing ongoing support for electricity sector gas demand. The average LNG feed gas flow in September rose to 18.3 billion cubic feet per day, higher than August but below the April peak, with export capacity limited by progress in new facility construction. ⑸ As for global gas prices, the European TTF and Asian JKM benchmarks are both near 44-month highs at around $27 and $24 per million British thermal units, respectively. However, US Henry Hub prices are relatively independent, as domestic supply meets demand and LNG export terminals are running near full capacity, making it difficult for global tensions to directly affect the US domestic market.