NEW YORK: US natural gas futures edged up on Friday, as forecasts projected increased demand amid warmer than usual weather and reduced supply over the next two weeks.
Front-month gas futures were up 0.7% at $3.712 per million British thermal units by 10:30 am EDT (1528 GMT). Prices hit $3.822 on Tuesday, the highest since late 2018.
Data provider Refinitiv projected average gas demand, including exports, would rise from 92.2 bcfd this week to 94.8 bcfd next week, as milder weather curbs air conditioning use.
Market participants also took support from Thursday’s weekly US Energy Information Administration (EIA) storage report which showed a smaller-than expected build last week.
Refinitiv said gas output in the Lower 48 US states averaged about 91 billion cubic feet per day (bcfd) so far in July. That compares with an average of 92.2 bcfd in June and an all-time high of 95.4 bcfd in November 2019.
“Consolidation in the industry as well as smaller capital flows because of environment, social and governance (ESG) concerns have both contributed to production levels below what prices would historically predict,” said John Abeln, analyst at Refinitiv.
But, “if Henry Hub gas futures break the $4 barrier, there will likely be a more aggressive (production) response, causing gains to level of,” Abeln said, also attributing Friday’s modest gains to projections for higher demand in the next two weeks.
The amount of gas flowing to US liquefied natural gas (LNG) export plants averaged 11 bcfd so far in July, up from 10.1 bcfd in June, but still below April’s record 11.5 bcfd.
With European and Asian gas both trading over $12 per mmBtu, analysts expect LNG exports from the United States to remain high.
US pipeline exports to Mexico averaged 6.5 bcfd so far in July, down from a record 6.7 bcfd in June.