Adds latest prices

By Scott DiSavino

July 3 (Reuters) -U.S. natural gas futures eased about 1% to a seven-week low on Wednesday on a rise in output so far in July and the oversupply of gas still in storage.

Gas stockpiles were now about 19% above normal for this time of year.

That small price decline occurred despite an expected smaller-than-usual weekly storage build for this time of year and forecasts the brutal heat wave blanketing much of the country will remain in place through at least mid-July.

That heat is forcing power generators to burn more gas than usual to produce power to keep air conditioners humming.

The U.S. Energy Information Administration (EIA) said utilities added 32 billion cubic feet (bcf) of gas into storage during the week ended June 28.

That was in line with the 32-bcf build analysts forecast in a Reuters poll and compares with an increase of 76 bcf in the same week last year and a five-year (2019-2023) average rise of 69 bcf for this time of year. EIA/GAS NGAS/POLL

Traders said storage builds have been smaller than usual for eight weeks in a row after several producers cut output earlier in the year in response to a drop in futures prices to 3-1/2-year lows in February and March.

Higher prices in recent weeks, however, prompted some producers, including EQT EQT.N and Chesapeake Energy CHK.O, to return to the well pad.

Front-month gas futures NGc1 for August delivery on the New York Mercantile Exchange fell 1.7 cents, or 0.7%, to settle at $2.418 per million British thermal units (mmBtu), their lowest close since May 15 for a third day in a row.

Recent declines in the front-month caused futures for September NGQ24-U24, which usually trade at a discount to August, to jump to a record premium of around 3.1 cents per mmBtu over the August contract.

In the spot market, next-day gas prices at the Waha hub NG-WAH-WTX-SNL in West Texas plunged from a negative 52 cents per mmBtu for Tuesday to negative $2.06 for Wednesday as pipeline constraints trapped gas in the Permian Shale.

It was the fourth time in seven days that Waha prices fell into negative territory during the current heat wave and the 21st time so far this year.

Next-day Waha prices first averaged below zero in 2019. It happened 17 times in 2019, six in 2020, none in 2021 or 2022, and once in 2023.

SUPPLY AND DEMAND

Financial data firm LSEG said gas output in the Lower 48 U.S. states rose to an average of 101.8 billion cubic feet per day (bcfd) so far in July.

That was up from an average of 100.2 bcfd in June and a 17-month low of 99.5 bcfd in May as many producers reduced drilling activities after prices fell to 3-1/2-year lows in February and March. U.S. output hit a monthly record high of 105.5 bcfd in December 2023.

With hotter weather expected next week, LSEG forecast average gas demand in the Lower 48, including exports, will rise from 98.4 bcfd this week to 104.4 bcfd next week. Those forecasts aresimilar to LSEG's outlook on Tuesday.

Gas flows to the seven big U.S. LNG export plants fell to 12.4 bcfd so far in July due mostly to a decline in feedgas at Cheniere Energy's LNG.N Sabine Pass in Louisiana earlier this week, down from 12.8 bcfd in June and a monthly record high of 14.7 bcfd in December 2023.

Reporting by Scott DiSavino, Editing by Franklin Paul and Trevor Hunnicutt

For gas data on LSEG's Eikon type ENERGY in the search bar and then go to the GAS drop down and the NORTH AMERICA drop down.

For Interactive Map, type 'Interactive Map' in the box at upper left of the Eikon terminal

For graphics on Baker Hughes rig counts, see: http://graphics.thomsonreuters.com/15/rigcount/index.html

For next-day SNL U.S. gas prices, see: 0#SNL-NG

For next-day SNL U.S. power prices, see: 0#SNL-PWR

For U.S. natgas price and storage polls, see: NGAS/POLL

For U.S. nuclear power outages, see: NUKE/

For U.S. Northwest hydro power report, see: NWRFC

For U.S./Canada natural gas rig count vs Henry Hub futures price, see: http://tmsnrt.rs/2eT9k44

For the U.S. natural gas speed guide, see: USGAS

For the U.S. power speed guide, see: USPOWER

To determine CFTC managed money net position add (NYMEX Henry Hub options and futures combined 3023651MNET) plus (ICE Henry Hub options and futures combined 3023391MNET divided by four) plus (NYMEX Henry Hub swaps options and futures combined 303565BMNET divided by four) plus (NYMEX Henry Hub penultimate gas swaps 303565CMNET divided by four)

NYMEX Henry Hub options and futures combined 0#3CFTC023651

NYMEX Henry Hub futures only 0#1CFTC023651

ICE Henry Hub options and futures combined 0#3CFTC023391

NYMEX Henry Hub swaps options and futures combined 0#3CFTC03565B

NYMEX Henry Hub Penultimate gas swaps 0#3CFTC03565C