U.S. natural gas futures jumped almost 6pc to a seven-year high on Monday on forecasts for higher demand next week than previously expected, as air conditioning use remains strong in most parts of the country and heating demand starts to pick up in other areas.
Traders also noted U.S. futures climbed as record global gas prices keep demand for U.S. exports high at the same time that more than half of U.S. production in the Gulf of Mexico remains shut-in two weeks after Hurricane Ida hit the Gulf Coast, and U.S. gas inventories, like those in Europe, remain lower than normal heading into the winter heating season, when demand for the fuel peaks.
Further U.S. supply disruptions from bad weather could also be around the corner, with the U.S. National Hurricane Center projecting Tropical Storm Nicholas will scrape the South Texas coast before making landfall near Corpus Christi Monday evening.
Front-month gas futures rose 29.3 cents, or 5.9pc, to settle at $5.231 per million British thermal units (mmBtu), their highest close since February 2014.
In addition to the front-month, futures for the rest of 2021, 2022 and 2023 were all rising, with calendar 2022 trading at a record high over $4 per mmBtu for a third day in a row.
That is much higher than most analysts forecast for 2022. After gas collapsed to a 25-year low in 2020, analysts forecast gas prices in 2021 would average $3.23 per mmBtu before slipping to $3.17 in 2022.
Data provider Refinitiv said gas output in the U.S. Lower 48 states fell to an average of 90.1 billion cubic feet per day (bcfd) so far in September, from 92.0 bcfd in August, due mostly to Ida-related losses along the Gulf Coast. That compares with a monthly record of 95.4 bcfd in November 2019.
About 1.2 bcfd, or 52pc, of gas production in the Gulf of Mexico remains shut-in since Ida, according to government data. U.S. power company Entergy Corp, meanwhile, said about 100,000 of its Louisiana customers were still without service, down from a peak of 902,000 who lost power due to Ida.
U.S. gas production from major shale basins, meanwhile, will increase to a record high for a fourth month in a row in October, according to U.S. Energy Information Administration (EIA) projections.
Refinitiv projected average U.S. gas demand, including exports, would rise from 87.2 bcfd this week to 87.5 bcfd next week. Next week's forecast was higher than Refinitiv expected on Friday.
The amount of gas flowing to U.S. liquefied natural gas (LNG) export plants has risen to an average of 10.9 bcfd so far in September, from 10.5 bcfd in August, as buyers around the world keep purchasing all the super-chilled gas the United States can produce. That compares with a monthly record of 11.5 bcfd in April.
Gas in Europe and Asia was trading around $21 and $19 per mmBtu, respectively, compared with just $5 for the U.S. fuel. Gas at the Title Transfer Facility (TTF) in the Netherlands, the European benchmark, was at a record high.