U.S. natgas jumps to 20-month high over $3 on rising LNG exports

U.S. natural gas futures climbed over 4% to a fresh 20-month high on Wednesday as LNG exports rise and output eases. Front-month gas futures rose 13.5 cents, or 4.6%, to $3.048 per million British thermal units at 8:47 a.m. EDT (1247 GMT). That is the first time the contract rose over $3 since January 2019 and puts the contract up about 70% from a recent low of $1.795 on Sept. 21.

Data provider Refinitiv said output in the Lower 48 U.S. states averaged 86.2 billion cubic feet per day (bcfd) so far in October, which would be its lowest month since September 2018. That compares with a four-month low of 87.2 bcfd in September and an all-time high of 95.4 bcfd in November 2019. Those production declines come as low prices earlier in the year due to coronavirus demand destruction caused energy firms to shut oil and gas wells and cut back on new drilling by so much that output from new wells no longer offsets existing well declines.

As LNG exports rise and the weather turns colder, Refinitiv projected average demand would jump from 90.0 bcfd this week to 97.7 bcfd next week. The amount of gas flowing to LNG export plants has averaged 7.0 bcfd so far in October, up from 5.7 bcfd in September. That would be the most in a month since April and puts exports on track to rise for a third month in a row for the first time since February when feedgas hit a record 8.7 bcfd as rising global gas prices prompt buyers to reverse cargo cancellations.

In the spot market, next-day gas rose to its highest since March 2019 at both the AECO hub NG-ASH-ALB-SNL and PG&E Gate NG-CG-PGE-SNL because of colder-than-normal weather in Alberta and hotter-than-normal weather in Northern California.

(Reporting by Scott DiSavino, Editing by Nick Zieminski)

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