U.S. natural gas futures held near a 12-week high on Thursday as bearish forecasts for less demand over the next two weeks than previously expected and an ongoing oversupply of gas in storage offset a bullish rise in liquefied natural gas exports and a continued reduction in output.
Front-month gas futures for June delivery on the New York Mercantile Exchange remained unchanged at $2.032 per million British thermal units (mmBtu). On Thursday, the contract closed at its highest level since Feb. 5.
For the week, the front-month was on track to gain about 27% after declining about 10% over the prior three weeks. That would be the biggest weekly increase since prices soared 27.6% in a week in September 2009.
Analysts forecast gas stockpiles were currently about 34% above normal levels for this time of year.
U.S. gas production was down about 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 currently the biggest U.S. gas producer and Chesapeake is on track to become the biggest producer after its merger with Southwestern Energy.
SUPPLY AND DEMAND
Financial firm LSEG said gas output in the Lower 48 U.S. states fell to an average of 96.3 billion cubic feet per day (bcfd) so far in May, down from 98.1 bcfd in April. That compares with a monthly record of 105.5 bcfd in December 2023.
On a daily basis, output was on track to increase by around 0.7 bcfd over the past two days to a preliminary 96.6 bcfd on Friday, up from a 15-week low of 95.9 bcfd on Wednesday.
Meteorologists projected weather across the Lower 48 states would remain mostly near-normal to warmer than normal through May 18.
LSEG forecast gas demand in the Lower 48, including exports, would rise from 91.4 bcfd this week to 92.3 bcfd next week before sliding to 89.5 bcfd in two weeks. The forecasts for this week and next week were lower than LSEG’s outlook on Thursday.
Gas flows to the seven big U.S. LNG export plants rose from an average of 11.9 bcfd in April to 12.2 bcfd so far in May with the slow return to service of Freeport LNG’s plant in Texas. That compares with a monthly record of 14.7 bcfd in December.
The U.S. became the world’s biggest LNG supplier in 2023, ahead of recent leaders Australia and Qatar, as much higher global prices fed demand for more exports due in part to supply disruptions and sanctions linked to Russia’s war in Ukraine.
Gas was trading around $10 per mmBtu at both the Dutch Title Transfer Facility (TTF) benchmark in Europe and the Japan Korea Marker (JKM) benchmark in Asia.
(Reporting by Scott DiSavino; editing by Jonathan Oatis)