U.S. natgas prices jump 6% to 4-month high as rising LNG feedgas boosts demand

(Reuters)U.S. natural gas futures jumped about 6% to a four-month high on Wednesday on lifted forecasts for weekly demand and as more gas was flowing to liquefied natural gas (LNG) export plants with flows to Freeport LNG’s plant in Texas up to an 11-month high.

Prices were also supported by analyst forecasts that utilities injected a smaller-than-usual amount of gas into storage for a fourth week in a row. Analysts estimated there was about 29% more gas in storage than usual for this time of year.

Front-month gasd futures for June delivery on the New York Mercantile Exchange rose 17.1 cents, or 6.4%, to settle at $2.842/MMBtu, their highest close since Jan. 17. That kept the front-month in technically overbought territory for a 14th day in a row for the first time since June 2016.

In other news, U.S. gas pipeline venture Mountain Valley Pipeline pushed back the target in-service date of its long-delayed pipe from West Virginia to Virginia to early June from the prior target of "prior to June 1."

Supply and demand. Financial firm LSEG said gas output in the Lower 48 U.S. states fell to an average of 97.3 Bft3d so far in May, down from 98.2 Bft3d in April. That compares with a monthly record of 105.5 Bft3d in December 2023.

On a daily basis, output was up about 0.7 Bft3d since hitting a 15-week low of 96.2 Bft3d on May 1. Energy traders said that increase was a sign the 63% gain in futures prices over the past three weeks likely prompted some drillers to start producing more gas.

U.S. gas production was still down by around 9% so far in 2024 after several energy firms, including EQT and Chesapeake Energy, delayed well completions and cut back on other drilling activities after prices fell to 3-1/2-year lows in February and March.

EQT is the biggest U.S. gas producer and Chesapeake is on track to become the biggest producer after its merger with Southwestern Energy. Meteorologists projected weather across the Lower 48 states would be warmer than normal from May 22–27 and then again from June 2–6 with a near normal stretch in the middle from May 28–June 1.

LSEG forecast gas demand in the Lower 48, including exports, would ease from 92.6 Bft3d this week to 91.8 Bft3d next week. The forecast for this week was higher than LSEG forecast on Tuesday, while its forecast for next week was lower.

Gas flows to the seven big U.S. LNG export plants rose from an average of 11.9 Bft3d in April to 12.7 Bft3d so far in May with the return of Freeport LNG’s 2.1- Bft3d plant in Texas. That compares with a monthly record of 14.7 Bft3d in December. With no new plants expected to enter service until later in 2024, average LNG feedgas was 13.1 Bft3d so far this year, the same as in 2023.

On a daily basis, flows to Freeport were on track to reach an 11-month high of 2.2 Bft3d on Wednesday, up from 2.1 Bft3d on Tuesday, while flows to U.S. energy company Kinder Morgan's Elba Island in Georgia were on track to slide to a four-month low of 0.3 Bft3d on Wednesday from a four-month high of 0.4 Bft3d on Tuesday.


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