US natural gas futures fell over 3% on Friday from a seven-year high in the prior session on expectations the United States will have enough gas supplies for this winter.
That price decline came despite continued strong demand for US liquefied natural gas (LNG) exports due to dangerously low gas stockpiles in Europe ahead of the winter and insatiable demand for the fuel in Asia. Prices in Europe and Asia soared to fresh records that were over five times higher than US prices.
Analysts expect US gas inventories will reach about 3.5 trillion cubic feet (tcf) at the start of the winter in November, which they said should be enough for the winter heating season even though that amount would be short of the 3.7 tcf five-year (2016-2020) average for that time of year.
That is nowhere near as dire as in Europe where analysts say gas storage is over 20% below normal in some countries.
US natural gas rise 4% ahead of storage report on soaring global prices
In a volatile week of trade, front-month gas futures for November delivery were down 20.5 cents, or 3.5%, to $5.662 per million British thermal units (mmBtu) at 10:15 a.m. EDT (1415 GMT). On Thursday, the contract soared over 7% to close at its highest since February 2014.
Earlier this week, gas prices closed up 11% to their highest since February 2014 on Monday, but dropped 6% on Wednesday. Traders said price swings were amplified by speculative trading around the expiration of the October future on Tuesday.
That volatility caused volumes in the US Natural Gas Fund, an exchange-traded fund designed to track gas prices, to reach over 30.2 million shares on Tuesday, its biggest daily volume since hitting a record 43.1 million shares in November 2018 when big changes in winter weather forecasts caused a rapid increase in prices and the failure and liquidation of commodity trading adviser OptionSellers.com.
So far this week, there have been no reports of hedge funds failing, but Statar, which invests in gas, reportedly lost about $130 million.
For the week, the front-month was up over 11%, putting it on track for its biggest weekly increase since August. The contract was also on track for a sixth week of gains in a row, which would be its longest winning streak since October 2020. During those six weeks, the contract has gained about 41%.
With gas prices at or near record highs of around $33 per mmBtu in Europe and $31 in Asia , versus less than $6 in the United States, traders said buyers around the world would keep purchasing all the LNG the United States could produce.
Despite reductions at several plants this month, data provider Refinitiv said the amount of gas flowing to US LNG export plants slipped modestly to an average of 10.4 billion cubic feet per day in September from 10.5 bcfd in August.
But no matter how high global prices rise, the United States only has the capacity to turn about 10.5 bcfd of gas into LNG. Global markets will have to wait until later this year to get more from the United States when the sixth liquefaction train at Cheniere Energy Inc's Sabine Pass and Venture Global LNG's Calcasieu Pass in Louisiana are expected to start producing LNG in test mode.
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