NEW YORK: US natural gas futures edged up on Monday as output remains slow to recover from well freeze-offs earlier in January, along with forecasts for more cold and heating demand this week than previously expected and a 16% jump in European gas futures.
European gas futures soared on concerns that Russia will invade the Ukraine and cut off supplies of gas to the rest of Europe.
Traders said demand for US liquefied natural gas (LNG) will remain strong so long as global prices keep trading well above US futures. Global prices were currently about seven times over US futures as utilities around the world scramble for LNG cargoes to replenish low stockpiles in Europe and meet surging demand in Asia.
Front-month gas futures for February delivery rose 2.8 cents, or 0.7%, to settle at $4.027 per million British thermal units (mmBtu).
Futures for the spring and summer months were up more than the front-month, which will expire later this week.
US speculators last week boosted their net long futures and options positions on the New York Mercantile and Intercontinental Exchanges for a second week in a row with gas demand expected to have reached a record high on Jan. 21, according to the US Commodity Futures Trading Commission’s Commitments of Traders report.
In addition to boosting heating demand, the last week’s cold cut gas output to its lowest level in four months as wells and other equipment froze in Texas, Pennsylvania and elsewhere. It was a reminder of the last time gas demand was expected to reach record highs before last February’s freeze.
During that February freeze, next-day gas jumped to record highs in several parts of the country - gaining over 1,100% on Feb. 12 at the Waha hub in West Texas - as a winter storm left millions without power and heat for days after freezing gas wells and pipes in Texas and other US central states.
In the current spot market, frigid weather and high heating demand over the past week in the US Northeast kept next-day power and gas prices in New York and New England at or near their highest levels since January 2018.
Data provider Refinitiv said output in the US Lower 48 states had averaged 94.3 billion cubic feet per day (bcfd) so far in January, down from a record 97.6 bcfd in December. Production rose a bit over the weekend from the lows seen last week.
With less cold weather forecast, Refinitiv projected average US gas demand, including exports, would drop from 143.2 bcfd this week to 133.9 next week.
On a daily basis, Refinitiv said total US gas demand plus exports hit a preliminary 155.8 bcfd on Jan. 21, which would top the current record of 150.6 bcfd on Jan. 30, 2019.
The amount of gas flowing to US LNG export plants has averaged 12.5 bcfd so far this month, which would top December’s monthly record of 12.2 bcfd.
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