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UPDATE 1-U.S. natgas futures rise 1% on lower output, hotter forecasts

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(Adds latest prices) June 28 (Reuters) - U.S. natural gas futures edged up about 1% on Tuesday on a preliminary drop in daily output and forecasts for hotter weather over the next two weeks that will prompt power generators to burn more gas to keep air conditioners humming. That increase also came on the last day of trade for the July futures contract, which is often a volatile day since trade volume is extremely low. On its last day as the front month, gas futures for July delivery on the New York Mercantile Exchange (NYMEX) rose 5.0 cents, or 0.8%, to settle at $6.551 per million British thermal units (mmBtu). Futures for August, which will soon be the front month, were up about 1% to $6.58 per mmBtu. With the U.S. Federal Reserve expected to keep raising interest rates, open interest in NYMEX futures fell on Monday to its lowest since July 2016 as investors continued to cut back on risky assets. So far this year, U.S. gas futures were up about 76% as much higher prices in Europe and Asia keep demand for U.S. liquefied natural gas (LNG) exports strong, especially since Russia's Feb. 24 invasion of Ukraine stoked fears Moscow might cut gas supplies to Europe. Gas was trading around $39 per mmBtu in Europe and $37 in Asia. TOP PRODUCER U.S. futures lag far behind global prices because the United States is the world's top producer, with all the gas it needs for domestic use, while capacity constraints inhibit additional LNG exports. Data provider Refinitiv said average gas output in the U.S. Lower 48 states slid to 95.1 billion cubic feet per day (bcfd) so far in June from 95.2 bcfd in May. That compares with a monthly record of 96.1 bcfd in December 2021. On a daily basis, output was on track to drop 1.8 bcfd to a preliminary two-week low of 94.3 bcfd on Tuesday. That would be its biggest daily drop since early February, but preliminary data is often revised higher later in the day. With hotter weather coming, Refinitiv projected average U.S. gas demand including exports would rise from 94.0 bcfd this week to 95.9 bcfd next week. The forecast for next week was lower than Refinitiv's outlook on Monday due to lower than previously expected LNG exports. The amount of gas flowing to U.S. LNG export plants dropped from an average of 12.5 bcfd in May to 11.2 bcfd so far in June due to the June 8 outage at Freeport LNG's plant in Texas, which is expected to last about three months. That compares with a monthly record of 12.9 bcfd in March. The seven big U.S. export plants can turn about 13.6 bcfd of gas into LNG. Freeport, the second-biggest U.S. LNG export plant, was consuming about 2 bcfd of gas before it shut, so a 90-day outage would leave around 180 billion cubic feet (bcf) of gas available to the U.S. market. Analysts said that should allow U.S. utilities to quickly rebuild low gas stockpiles ahead of next winter, but cuts the amount of U.S. gas available to the rest of the world. That is a problem for Europe where most U.S. LNG has gone as countries there wean themselves off Russian energy since Moscow's invasion of Ukraine. Over the past two weeks, Russia has exported just 3.7 bcfd of gas on the three main lines into Germany - Nord Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route. That is down from around 6.5 bcfd in mid June and an average of 11.6 bcfd in June 2021. Week ended Week ended Year ago Five-year June 24 June 17 June 24 average (Forecast) (Actual) June 24 U.S. weekly natgas storage change (bcf): +70 +74 +73 +73 U.S. total natgas in storage (bcf): 2,239 2,169 2,547 2,573 U.S. total storage versus 5-year average -13.0% -13.2% Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five Year Last Year Average Average 2021 (2017-2021) Henry Hub 6.55 6.50 3.27 3.73 2.89 Title Transfer Facility (TTF) 39.42 40.27 10.27 16.04 7.49 Japan Korea Marker (JKM) 37.09 37.10 11.58 18.00 8.95 Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days Two-Week Total Forecast Current Day Prior Day Prior Year 10-Year 30-Year Norm Norm U.S. GFS HDDs 4 4 2 5 5 U.S. GFS CDDs 227 220 202 197 190 U.S. GFS TDDs 231 224 204 202 195 Refinitiv U.S. Weekly GFS Supply and Demand Forecasts Prior Week Current Week Next Week This Week Five-Year Last Year Average For Month U.S. Supply (bcfd) U.S. Lower 48 Dry Production 95.2 95.7 96.3 91.0 84.6 U.S. Imports from Canada 7.7 7.7 7.7 8.0 7.7 U.S. LNG Imports 0.0 0.0 0.0 0.0 0.1 Total U.S. Supply 102.9 103.4 103.9 99.0 92.4 U.S. Demand (bcfd) U.S. Exports to Canada 2.3 2.2 2.2 2.3 2.2 U.S. Exports to Mexico 6.0 6.0 6.1 6.5 5.1 U.S. LNG Exports 10.6 10.5 10.5 11.1 4.3 U.S. Commercial 4.4 4.4 4.3 4.3 4.7 U.S. Residential 3.7 3.5 3.5 3.5 4.3 U.S. Power Plant 37.9 39.6 41.4 39.5 32.8 U.S. Industrial 21.0 21.0 20.9 20.8 20.9 U.S. Plant Fuel 4.7 4.7 4.8 4.7 4.7 U.S. Pipe Distribution 2.0 2.0 2.1 2.0 1.8 U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1 Total U.S. Consumption 73.8 75.3 77.1 74.9 69.3 Total U.S. Demand 92.7 94.0 95.9 94.8 80.9 U.S. weekly power generation percent by fuel - EIA Week ended Week ended Week ended Week ended Week ended Jul 1 Jun 24 Jun 17 Jun 10 Jun 3 Wind 12 8 12 Solar 3 5 4 Hydro 7 7 7 Other 2 2 2 Petroleum 0 0 0 Natural Gas 38 41 36 Coal 20 20 19 Nuclear 17 19 19 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu) Hub Current Day Prior Day Henry Hub 6.09 5.80 Transco Z6 New York 5.67 5.74 PG&E Citygate 7.81 7.49 Dominion South 5.51 5.38 Chicago Citygate 6.02 5.88 Algonquin Citygate 5.95 5.95 SoCal Citygate 7.93 6.57 Waha Hub 5.70 5.50 AECO 4.51 4.63 SNL U.S. Power Next-Day Prices ($ per megawatt-hour) Hub Current Day New England 64.00 67.75 PJM West 75.00 99.25 Ercot North 82.00 86.00 Mid C 75.50 66.00 Palo Verde 80.25 73.50 SP-15 77.50 71.00 (Reporting by Scott DiSavino, Editing by Louise Heavens and Marguerita Choy)