U.S. natgas futures rise to 31-month high on hot forecasts

U.S. natural gas futures climbed over 3% to a 31-month high on forecasts for hotter weather over the next two weeks than earlier expected and soaring global gas prices that should keep U.S. LNG exports near record highs.

"The (weather) forecast has turned a lot more supportive looking out for the next 6 to 10 days ... and we're seeing a lot of increased exports," said Marshall Steeves, energy markets analyst at IHS Markit.

Front-month gas futures rose 13.1 cents, or 3.3%, to settle at $4.158 per million British thermal units (mmBtu), their highest close since December 2018.

Rising gas prices in recent months and an 8% drop in U.S. crude futures so far this week helped to push the premium of oil over gas to its lowest since December 2020. Over the last several years, that premium has prompted U.S. energy firms to focus most of their drilling activity on finding more oil instead of gas because crude was a more valuable commodity.

Data provider Refinitiv said gas output in the U.S. Lower 48 states held at 91.6 billion cubic feet per day (bcfpd) so far in August, the same as July. That compares with an all-time high of 95.4 bcfpd in November 2019.

Refinitiv projected average gas demand, including exports, would rise from 90.9 bcfpd this week to 94.5 bcfpd next week as power generators burn more of the fuel to meet rising air conditioning use. The forecast for next week, however, was lower than Refinitiv predicted on Tuesday as high gas prices prompt some power generators to burn coal instead of gas.

The amount of gas flowing to U.S. LNG export plants slipped from an average of 10.8 bcfpd in July to 10.4 bcfpd so far in August due mostly to a reduction at Cameron LNG in Louisiana. That compares with a record 11.5 bcfpd in April.

U.S. pipeline exports to Mexico fell from an average of 6.5 bcfpd in July to 6.0 bcfpd so far in August. That compares with a record 6.8 bcfpd in July.

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