US natgas jumps almost 16pc from 7 week low as demand and LNG exports rise

US natural gas futures jumped almost 16% on Wednesday from a seven-week low in the prior session as output continues to slide, demand edges up and liquefied natural gas (LNG) exports increase.

Front-month gas futures rose 29.1 cents, or 15.9%, to settle at $2.125 per million British thermal units in their biggest one-day percentage gain since early August. On Tuesday, the front-month closed at its lowest since July 31 for a second day in a row.

The market has already been extremely volatile this week - prices fell over 10% on Monday - as traders roll out of front-month October contracts, which expire Sept. 28, and into the much higher priced November futures. The premium of November over October reached a record high of 89 cents per mmBtu earlier this week but was now down to a still historically high 67 cents.

Data provider Refinitiv said output in the Lower 48 US states was on track to fall to 83.8 billion cubic feet per day (bcfd) on Wednesday, its lowest since August 2018. A price collapse earlier this year due to coronavirus demand destruction prompted energy firms to reduce drilling by so much that the amount of gas from new wells was no longer enough to cover declines from existing wells. The rig count hit its lowest in at least 80 years in August.

With low prices earlier in the week, Refinitiv projected demand, including exports, would rise from 82.0 bcfd this week to 84.4 bcfd next week with electric generators expected to burn more gas instead of coal to produce power.

The amount of gas flowing to LNG export plants was on track to rise from a two-week low of 3.9 bcfd on Tuesday to 4.0 bcfd on Wednesday as vessels started to enter ports in the Gulf of Mexico after Tropical Storm Beta dissipated.