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Markets

U.S. natural gas up to 30-month high on output drop, soaring global prices

  • Traders said the U.S. price increase came despite forecasts for less hot weather and lower demand over the next two weeks than previously expected.
03 Jul, 2021

U.S. natural gas futures on Friday rose to a fresh 30-month high on Thursday ahead of the July Fourth holiday weekend with a drop in output due to a problem with a natural gas liquids pipeline in West Virginia and on soaring global gas prices.

Traders said the U.S. price increase came despite forecasts for less hot weather and lower demand over the next two weeks than previously expected.

Front-month gas futures rose 3.9 cents, or 1.1%, to settle at $3.700 per million British thermal units (mmBtu), their highest close since December 2018 for a fifth day in a row.

That kept the front-month in overbought territory with a relative strength index (RSI) over 70 for a seventh straight day, and put the contract up for a ninth day in a row for the first time since March 2017.

For the week, the contract gained about 6% after rising about 9% last week.

Data provider Refinitiv said output in the Lower 48 U.S. states dropped to an average of 87.5 billion cubic feet per day (bcfd) so far in July due mostly to the pipeline problem in West Virginia. That compares with an average of 92.2 bcfd in June and an all-time high of 95.4 bcfd in November 2019.

Refinitiv projected average gas demand, including exports, would slide from 93.3 bcfd this week to 89.9 bcfd next week as the U.S. July Fourth holiday and milder weather cuts air conditioning use, before rising to 93.8 bcfd in two weeks when the weather is forecast to turn seasonally hotter.

The outlook for next week was a little lower than Refinitiv projected on Thursday.

The amount of gas flowing to U.S. liquefied natural gas (LNG) export plants averaged 10.9 bcfd so far in July, up from 10.1 bcfd in June but still below the record 11.5 bcfd in April.

With European and Asian gas both trading over $12 per mmBtu, analysts said buyers around the world would keep purchasing all the LNG the United States can produce.

The Title Transfer Facility (TTF) in the Netherlands, the European gas benchmark, was near its highest since October 2008.

U.S. pipeline exports to Mexico averaged 6.4 bcfd so far in July, down from a record 6.7 bcfd in June.

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