NEW YORK: US natural gas futures climbed on Friday with the coming of seasonally colder weather and record liquefied natural gas (LNG) exports.
That US price increase came despite a 6% decline in European gas prices, near record US gas production and healthy US stockpiles for the winter.
US LNG exports rose just in time to help Europe refill gas stockpiles. Gas prices at the Title Transfer Facility (TTF) in the Netherlands gained about 15% this week on worries Russian gas company Gazprom PAO may not deliver enough fuel to Europe this winter after Germany’s energy regulator suspended the approval process for Gazprom’s Nord Stream 2 gas pipeline from Russia to Germany.
Global gas prices hit record highs over the past couple of months as utilities around the world scramble for LNG cargoes to replenish extremely low stockpiles in Europe and meet insatiable demand in Asia, where energy shortfalls have caused power blackouts in China.
Following those global gas prices, US futures jumped to a 12-year high in early October on expectations LNG demand would remain strong for months. But overseas prices continued to trade about six times higher than US futures because the United States has plenty of gas in storage and ample production.
Analysts have said European inventories were about 17% below normal for this time of year, compared with just 2% below normal in the United States.
Front-month gas futures at the Henry Hub benchmark in Louisiana rose 16.3 cents, or 3.3%, to settle at $5.065 per million British thermal units (mmBtu). For the week, the contract was up about 6% after dropping about 13% last week.
Analysts at consultancy Rystad Energy estimated that an average Henry Hub price of $4 per mmBtu in 2022 will result in a total hedging loss of $5.2 billion on gas derivative contracts for 11 of the country’s biggest gas producers, including EQT Corp and Southwestern Energy Co, because the firms locked in prices at much lower levels.
The 2022 futures strip was currently trading around $4.29. If Henry Hub prices average $5 in 2022, Rystad estimated the 11 firms could suffer around $9.8 billion in hedging losses.
Data provider Refinitiv said output in the US Lower 48 states averaged 96.0 billion cubic feet per day (bcfd) so far in November, up from 94.1 bcfd in October and the monthly record of 95.4 bcfd in November 2019.
Refinitiv projected average US gas demand, including exports, would jump from 104.8 bcfd this week to 111.4 bcfd next week and 114.8 bcfd as the weather turns seasonally colder and homes and businesses crank up their heaters. The forecast for next week was lower than Refinitiv’s forecast on Thursday.
US exports to Canada averaged 3.1 bcfd so far in November, up from 2.1 bcfd in October, according to Refinitiv. That compares with an all-time monthly high of 3.5 bcfd in December 2019.
With the sixth train at Cheniere Energy Inc’s Sabine Pass in Louisiana producing LNG in test mode, the amount of gas flowing to US LNG export plants was on track to reach 12.03 bcfd on Friday, which would top the current daily record high of 11.99 bcfd set in late March.
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