U.S. natgas futures rise to one-week high on expected colder weather

U.S. natural gas futures edged up to their highest in a week on Friday on forecasts for heating demand to rise in a couple of weeks with a seasonal cooling of the weather. Traders noted that price rise came even though the weather was still expected to remain milder than normal through late December. 

Front-month gas futures rose 3.6 cents, or 0.9%, to $3.850 per MMBtu, putting the contract on track for its highest close since Dec. 3. The contract, however, was still down about 7% for the week after it plunged over 11% on Monday in its biggest daily decline since January 2019. Last week, the contract dropped over 24% in its biggest weekly decline since February 2014. 

In recent months, global gas prices hit record highs as utilities around the world scrambled for liquefied natural gas (LNG) cargoes from the U.S. and elsewhere to replenish low stockpiles in Europe and meet surging demand in Asia, where energy shortfalls have caused power blackouts in China. U.S. futures jumped to a 12-year high in early October but have since pulled back because the U.S. has plenty of gas in storage and ample production for winter. Overseas prices were currently trading about nine times higher than U.S. futures. 

Analysts have said European inventories were about 20% below normal for this time of year, compared with just 3% below normal in the U.S.. Looking ahead, many analysts said mild weather expected in coming weeks will allow U.S. utilities to leave enough gas in storage and cause stockpiles to reach above normal levels by mid-December. That would be the first time since April that storage would be above normal levels. 

Data provider Refinitiv said output in the U.S. Lower 48 states averaged 96.3 Bft³/d so far in December, down from a monthly record of 96.5 Bft³/d in November. Refinitiv projected average U.S. gas demand, including exports, would drop from 116.9 Bft³/d this week to 110.5 Bft³/d next week with an unusual warming of the weather before rocketing to 121.8 Bft³/d in two weeks as the weather turns seasonally colder.

The amount of gas flowing to U.S. LNG export plants averaged 11.8 Bft³/d so far in December now that the sixth train at Cheniere Energy Inc's Sabine Pass plant in Louisiana is producing LNG. That compares to 11.4 Bft³/d in November and a monthly record of 11.5 Bft³/d in April. 

With gas prices around $34 per MMBtu in Europe and $35 in Asia, compared with about $4 in the U.S., traders said buyers around the world would keep purchasing all the LNG the U.S. can produce. 

But no matter how high global gas prices rise, the U.S. only has the capacity to turn about 11.1 Bft³/d of gas into LNG. The rest of the gas flowing to the export plants is used to fuel equipment that produces the LNG. Global markets will have to wait until later this year to get more when Venture Global LNG's Calcasieu Pass in Louisiana starts producing LNG in test mode. 

 (Reporting by: Scott DiSavino Editing by: Chizu Nomiyama:

 

 

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