U.S. natgas prices jump 8% on cooler weather, higher global gas prices
U.S. natural gas futures jumped about 8% to a one-week high on Thursday on forecasts for cooler weather and more heating demand over the next two weeks than previously expected and on rising prices for gas in global markets that should boost the value of U.S. liquefied natural gas (LNG) exports.
That price increase came despite a bearish bigger-than-expected weekly storage build that was also bigger than the five-year average for the first time in 15 weeks.
Front-month gas futures for November delivery on the New York Mercantile Exchange rose 18.0 cents, or 7.7%, to settle at $2.522 per million British thermal units (MMBtu), their highest close since Oct. 11.
The U.S. Energy Information Administration (EIA) said utilities added 80 Bft3 of gas into storage during the week ended Oct. 18.
That was much bigger than the 60- Bft3 build analysts forecast in a Reuters poll and compares with an increase of 81 Bft3 in the same week last year and a five-year (2019–2023) average rise of 76 Bft3 for this time of year.
Lower injections in recent weeks came because many producers reduced drilling activities this year after average spot monthly prices at the U.S. Henry Hub benchmark in Louisiana fell to a 32-year low in March. Prices have remained relatively low since then.
Supply and demand. Financial group LSEG said average gas output in the Lower 48 U.S. states slipped to 101.5 Bft3d so far in October, down from 101.8 Bft3d in September. That compares with a record 105.5 Bft3d in December 2023.
On a daily basis, output was on track to drop by around 2.0 Bft3d over the past six days to a preliminary two-week low of 100.8 Bft3d on Thursday. Analysts, however, have noted that preliminary data is often revised later in the day.
With so many firms curtailing drilling, analysts have projected average output in calendar 2024 would decline for the first time since 2020 when the COVID-19 pandemic cut demand for the fuel.
Even though the latest forecasts were for lower temperatures than previously expected in coming weeks, meteorologists still expect the weather in the Lower 48 states to remain warmer than normal through at least Nov. 8.
With cooler weather coming, LSEG forecast average gas demand in the Lower 48, including exports, would rise from 95.1 Bft3d this week to 99.4 Bft3d next week. The forecast for this week was lower than LSEG's outlook on Wednesday.
The amount of gas flowing to the seven big U.S. liquefied natural gas (LNG) export plants rose to an average of 13.0 Bft3d so far in October, up from 12.7 Bft3d in September. That compares with a monthly record high of 14.7 Bft3d in December 2023.
Analysts noted that maintenance reductions at Cheniere Energy's Sabine and Cameron LNG's Cameron export plants in Louisiana should reduce LNG feedgas in coming days.
The U.S. became the world's biggest LNG supplier in 2023, ahead of recent leaders Australia and Qatar, as much higher global prices feed demand for more exports due in part to supply disruptions and sanctions linked to Russia's invasion of Ukraine in February 2022.
Gas prices climbed to a 10-month high over $13 per MMBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe and a five-week high near $14 at the Japan Korea Marker (JKM) benchmark in Asia.
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