NEW YORK: US natural gas futures jumped over 6% on Monday on forecasts for cooler weather and higher heating demand over the next two weeks than previously expected.
Traders also cited an 8% spike in European gas prices which kept demand for US liquefied natural gas (LNG) exports near record highs. European prices gained in part on the possibility of Russia invading Ukraine and cutting gas supplies to the rest of Europe.
US front-month gas futures for March delivery rose 25.4 cents, or 6.4%, to settle at $4.195 per million British thermal units (mmBtu), their highest close since Feb. 8.
Gas futures traded around $27 per mmBtu in Europe and $25 in Asia.
Since the start of the year, the US market has focused more on changes in US weather and domestic supply and demand, rather than what is happening around the world. So far in 2022, US gas only followed European prices about a third of the time versus two-thirds during the fourth quarter of 2021.
But, traders said, a 10% jump in European prices was hard to ignore, noting demand for US LNG will remain strong so long as global gas prices trade well above US futures as utilities around the world scramble for cargoes to meet surging demand in Asia and replenish low inventories in Europe.
That is even more true now with heightened concerns Russia could invade Ukraine. If Russia invades, Europe and the United States would likely impose sanctions on Moscow, which could prompt Russia to cut gas supplies to Europe. Russia provides around 30%-40% of Europe’s gas supplies, totaling about 16.3 bcfd in 2021.
Over the weekend, there were tankers loading at all seven US LNG export plants for the first time ever after Venture Global last week got approval from federal regulators to load the first cargo at its Calcasieu Pass LNG plant in Louisiana. A tanker arrived at Calcasieu on Feb. 7 and will likely leave with the plant’s first cargo this week.
The amount of gas flowing to all US LNG export plants rose to an average of 12.6 billion cubic feet per day (bcfd) so far in February, which would top January’s monthly record of 12.4 bcfd, as the Calcasieu liquefaction trains enter service.
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