UPDATE 1-US natgas futures drop 4% on record output, lower demand forecast

(Adds latest prices) May 30 (Reuters) - U.S. natural gas futures dropped about 4% on Tuesday on record output and forecasts for milder weather and lower demand over the next two weeks than previously expected. On its first day as the front-month, gas futures for July delivery on the New York Mercantile Exchange fell 9.0 cents, or 3.7%, from where the July contract closed in the prior session to settle at $2.327 per million British thermal units (mmBtu). That, however, was still up about 7% from where the June contract expired when it was still the front-month on Friday before the long U.S. Memorial Day weekend. That settle for the June contract was the lowest for the front-month since May 5. Equitrans Midstream Corp's long-delayed $6.6 billion Mountain Valley gas pipe from West Virginia to Virginia could win federal approval as part of Washington's debt limit deal. Shares in Equitrans jumped about 36% to $8.28 on the news, putting the stock on track for its highest close since December 2022. If Equitrans is able to complete Mountain Valley in late 2023 or early 2024, it would boost the amount of fuel producers could pull out of the ground in the Appalachia basin in Pennsylvania, West Virginia and Ohio, the nation's biggest shale gas producing region. Producers in Appalachia are already producing about all the gas they can ship out of the region since the pipes out of the basin are close to full. Even though gas prices dropped about 16% last week, speculators boosted their net long futures and options positions on the New York Mercantile and Intercontinental Exchanges for a second week in a row to their highest since June 2022, according to the U.S. Commodity Futures Trading Commission's Commitments of Traders report. In the spot market, mild weather in the U.S. East pressured next-day power prices for Tuesday to their lowest since March 2021 in New England and December 2021 at the PJM Western Hub in western Pennsylvania. In the U.S. West, mild weather and ample hydropower pushed next-day gas prices for Tuesday at the Southern California Border to $1.60 per mmBtu, their lowest since July 2020. SUPPLY AND DEMAND Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 101.7 billion cubic feet per day (bcfd) so far in May, which would top April's monthly record of 101.4 bcfd. The amount of gas flowing from Canada to the U.S., meanwhile, was on track to rise to 7.6 bcfd on Tuesday, up from 7.2 bcfd on Monday, according to Refinitiv. So far this month, Canadian exports have dropped from a six-week high of 8.5 bcfd on May 4 to a 25-month low of 6.4 bcfd on May 17 as wildfires in Alberta caused energy firms to cut oil and gas production. Those exports rose to 8.1 bcfd on May 23 after firefighters made significant progress controlling the blazes. That compares with average Canada-to-U.S. exports of 8.3 bcfd since the start of the year and 9.0 bcfd in 2022. About 8% of the gas consumed in, or exported from, the U.S. comes from Canada. Meteorologists projected the weather in the Lower 48 states would remain near normal through June 14 with a couple of warmer than normal days on June 1-2 and June 13-14. Refinitiv forecast U.S. gas demand, including exports, would rise from 89.4 bcfd this week to 92.9 bcfd next week as the weather turns seasonally warmer. Those forecasts were lower than Refinitiv forecast on Friday. Week ended Week ended Year ago Five-year May 26 May 19 May 26 average (Forecast) (Actual) May 26 U.S. weekly natgas storage change (bcf): 101 96 82 101 U.S. total natgas in storage (bcf): 2,437 2,336 1,889 2,097 U.S. total storage versus 5-year average 16.2% 17.0% Global Gas Benchmark Futures ($ per mmBtu) Current Prior Day This Month Prior Year Five Year Day Last Year Average Average 2022 (2018-2022) Henry Hub 2.35 2.42 8.16 6.54 3.60 Title Transfer Facility (TTF) 7.78 7.80 28.96 40.50 14.39 Japan Korea Marker (JKM) 9.24 9.39 22.70 34.11 14.31 Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days Two-Week Total Forecast Current Prior Day Prior Year 10-Year 30-Year Day Norm Norm U.S. GFS HDDs 12 22 14 24 27 U.S. GFS CDDs 137 107 132 145 135 U.S. GFS TDDs 149 129 146 169 152 Refinitiv U.S. Weekly GFS Supply and Demand Forecasts Prior Week Current Next Week This Week Five-Year Week Last Year Average For Month U.S. Supply (bcfd) U.S. Lower 48 Dry Production 101.7 102.5 102.6 97.3 89.1 U.S. Imports from Canada 6.4 6.4 6.7 8.2 7.7 U.S. LNG Imports 0.0 0.0 0.0 0.0 0.1 Total U.S. Supply 108.2 108.9 109.3 105.5 96.9 U.S. Demand (bcfd) U.S. Exports to Canada 2.3 2.6 2.6 2.7 2.3 U.S. Exports to Mexico 5.7 5.7 5.4 6.0 5.2 U.S. LNG Exports 12.8 13.3 13.5 12.8 7.0 U.S. Commercial 4.9 4.5 4.5 4.6 5.7 U.S. Residential 4.5 3.9 3.8 4.0 6.7 U.S. Power Plant 32.2 31.1 34.8 31.0 27.5 U.S. Industrial 21.3 21.2 21.3 20.7 21.3 U.S. Plant Fuel 5.0 5.1 5.1 5.1 5.0 U.S. Pipe Distribution 1.9 1.8 1.9 1.8 2.1 U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1 Total U.S. Consumption 70.0 67.7 71.4 67.3 68.4 Total U.S. Demand 90.8 89.4 92.9 88.8 82.9 U.S. weekly power generation percent by fuel - EIA Week ended Week ended Week ended Week ended Week ended Jun 2 May 26 May 19 May 12 May 5 Wind 12 9 8 12 13 Solar 5 5 4 5 5 Hydro 9 9 9 9 8 Other 2 2 2 2 2 Petroleum 0 0 0 0 0 Natural Gas 36 40 42 40 39 Coal 13 15 15 14 13 Nuclear 23 20 19 19 19 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu) Hub Current Prior Day Day Henry Hub 1.88 2.23 Transco Z6 New York 1.25 1.39 PG&E Citygate 2.89 2.80 Eastern Gas (old Dominion South) 1.25 1.36 Chicago Citygate 1.62 1.94 Algonquin Citygate 1.27 1.55 SoCal Citygate 1.60 2.00 Waha Hub 1.89 2.12 AECO 1.38 1.49 SNL U.S. Power Next-Day Prices ($ per megawatt-hour) Hub Current Prior Day Day New England 20.50 23.25 PJM West 20.75 24.50 Ercot North 36.50 32.50 Mid C 14.13 23.25 Palo Verde 14.25 17.00 SP-15 16.00 18.50 (Reporting by Scott DiSavino; Editing by Andrea Ricci and Marguerita Choy)