U.S. natural gas futures jumped about 4% to a one-week high on Monday on forecasts for colder weather and higher heating demand in late November than previously expected and as record amounts of gas flow to U.S. liquefied natural gas (LNG) export plants.
That price increase occurred even though drillers kept pulling record amounts of gas out of the ground and forecasts for mostly mild weather over the next 10 days that should allow utilities to keep injecting gas into storage for a couple more weeks.
After declining for five days in a row, front-month gas futures for December delivery on the New York Mercantile Exchange were up 12.6 cents, or 4.2%, to $3.159 per million British thermal units (mmBtu) at 10:32 a.m. EST (1532 GMT), putting the contract on track for its highest close since Nov. 6.
On Friday, the contract closed at its lowest price since Oct. 25 for a fourth day in a row.
The U.S. Energy Information Administration (EIA) did not release its weekly gas storage report last week due to a planned systems upgrade. EIA said it will resume its regular schedule this week.
Analysts forecast utilities pulled about 7 billion cubic feet (bcf) of gas out of storage during the week ended Nov. 3, which was colder than normal. If correct, that would be the first withdrawal of the 2023-2024 winter season.
With the return of milder weather during the week ended Nov. 10, analysts forecast utilities injected about 45 bcf of gas back into storage.
SUPPLY AND DEMAND
LSEG said average gas output in the Lower 48 U.S. states has risen to 107.4 billion cubic feet per day (bcfd) so far in November, up from a record 104.2 bcfd in October.
On a daily basis, output hit a record 108.6 bcfd on Sunday, topping the prior daily all-time high of 108.3 bcfd on Saturday.
Meteorologists projected the weather would remain warmer than normal through Nov. 21 before near- to colder-than-normal temperatures prevail from Nov. 22-Nov. 28.
Even with colder weather coming, LSEG forecast U.S. gas demand in the Lower 48 states, including exports, would slide from 111.0 bcfd this week to 108.5 bcfd next week because many businesses and government offices will be closed for several days for the Thanksgiving holiday.
Those forecasts were higher than Refinitiv’s outlook on Friday.
Pipeline exports to Mexico have fallen to an average of 6.0 bcfd so far in November, down from 6.5 bcfd in October and a record 7.0 bcfd in August.
Analysts expect U.S. exports to Mexico will rise by the end of the year once the first 0.18-bcfd liquefaction train at U.S.-based New Fortress Energy’s plant in Altamira in Mexico starts pulling in U.S. gas to turn into LNG for export.
Gas flows to the seven big U.S. LNG export plants have risen to an average of 14.2 bcfd so far in November, up from 13.7 bcfd in October and a monthly record of 14.0 bcfd in April.
On a daily basis, feedgas to LNG export plants hit a record 14.93 bcfd on Sunday, topping the prior all-time high of 14.90 bcfd on April 13.
The U.S. is on track to become the world’s biggest LNG supplier in 2023, ahead of recent leaders Australia and Qatar. Much higher global prices have fed demand for U.S. exports due in part to supply disruptions and sanctions linked to Russia’s war in Ukraine.
Gas was trading around $15 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe and $17 at the Japan Korea Marker (JKM) in Asia.
(Reporting by Scott DiSavino; Editing by Paul Simao)