NEW YORK: US natural gas futures on Friday closed out their biggest yearly gain in five powered mostly by strong demand for US liquefied natural gas (LNG) exports helped by an initial surge in global prices.
The contract climbed to its highest in more than a decade, at about $6.5 per million British thermal units (mmBtu) earlier in 2021.
But the last quarter of the year was still its worst since the third quarter of 2008, with the market pressured by a subsequent retreat in European prices with forecasts projecting a milder-than-expected winter.
“Earlier in the year US production was down and we had global demand really start to take off. Now we’re seeing a change in the complexion in the US market because we’re on the path of being a major LNG exporter and that’s rewriting the way that prices move,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.
“We’re getting more tied to the global market.”
Front-month gas futures rose 16.9 cents, or about 5%, to settle at $3.730 per million British thermal units. For the year, the contract jumped over 47%, its biggest yearly percentage rise since 2016.
Data provider Refinitiv estimated 462 heating degree days (HDDs) over the next two weeks in the lower 48 US states, higher than the 30-year normal of 441 HDDs for this time of year.
HDDs, used to estimate demand to heat homes and businesses, measure the number of degrees a day’s average temperature is below 65 Fahrenheit (18 Celsius).
Preliminary data from Refinitiv showed output in the US lower 48 has averaged 97.4 billion cubic feet per day (bcfd) so far in December, which would top November’s monthly record of 96.5 bcfd.
The amount of gas flowing to US LNG export plants has averaged 12.2 bcfd so far in December, now that the sixth train at Cheniere Energy Inc’s Sabine Pass plant in Louisiana is producing LNG. That compares with 11.4 bcfd in November and is likely to beat the monthly record of 11.5 bcfd set in April.
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