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Markets

US natgas futures flat as mild weather offsets record LNG exports

  • On its second to last day as the front-month, gas futures for April delivery remained unchanged at $2.568 per million British thermal units (mmBtu) .
  • Traders noted the 200-day moving average has become a strong price floor or technical level of support. The front-month has not settled below the 200-day since September 2020.
26 Mar 2021

US natural gas futures were little changed on Friday as rising demand to meet near record liquefied natural gas (LNG) exports was offset by expectations that mild weather kept heating demand low this week, prompting utilities to start adding gas to storage earlier than normal.

Utilities usually don't start adding gas to storage until April.

On its second to last day as the front-month, gas futures for April delivery remained unchanged at $2.568 per million British thermal units (mmBtu) at 9:06 a.m. EDT (1306 GMT).

Traders noted the 200-day moving average has become a strong price floor or technical level of support. The front-month has not settled below the 200-day since September 2020.

The May contract, which will soon be the front-month, was down less than a penny to $2.62 per mmBtu. That put the premium of the second-month over the front-month at its highest since November 2020.

For the week, the front-month was on track to rise about 1% after falling a total of 17% over the prior four weeks.

Data provider Refinitiv said output in the Lower 48 US states averaged 91.0 billion cubic feet per day (bcfd) so far in March, up sharply from a 28-month low of 86.5 bcfd in February, when extreme weather froze gas wells and pipes in Texas. That, however, was still much lower than the record monthly high of 95.4 bcfd in November 2019.

Refinitiv projected average gas demand, including exports, would hold at 97.5 bcfd this week and next before dropping to 93.8 bcfd as the weather turns milder.

The amount of gas flowing to US LNG export plants, meanwhile, averaged 10.7 bcfd so far in March. That compares with a four-month low of 8.5 bcfd in February, when extreme cold cut power and gas supplies to the facilities, and puts feedgas on track to match the monthly record of 10.7 bcfd in December.

Buyers around the world continue to purchase near record amounts of US gas because prices in Europe and Asia remain high enough to cover the cost of buying and transporting the US fuel across the ocean. That is especially true now with prices rising in Europe due to the temporary closure of the Suez Canal, which is slowing LNG vessels from Qatar, the world's biggest LNG producer, from reaching the continent.

Traders, however, noted US LNG exports cannot rise much more until new units enter service in 2022, since the United States only has the capacity to export about 10.5 bcfd of gas as LNG. LNG plants can pull in a little more gas than they can export since they use some of the fuel to run the facility.

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