NEW YORK: US natural gas futures climbed almost 3% to a one-week high on Tuesday on forecasts for much colder weather and higher heating demand over the next two weeks than previously expected.
Traders noted the price increase came despite the continued slow return of US production from cold weather-related reductions over the past month, and a 15% drop in European gas futures as some Russian troops return to base, easing tensions with Ukraine.
Over the past month or so, the US has worked with other nations to ensure that gas supplies - mostly from liquefied natural gas (LNG) - would keep flowing to Europe in case Russia cuts off supplies to the rest of the continent.
If Russia invades Ukraine, the US and Europe have said they would sanction Russia, which would likely cause Russia to cut some gas exports to Europe. Russia provides around 30%-40% of Europe’s gas supplies, totalling about 16.3 billion cubic feet per day (bcfd) in 2021.
Since the start of the year, however, the US gas market has focused more on changes in US weather and domestic supply and demand, rather than what is happening around the world. So far in 2022, US gas followed European prices only about a third of the time versus two-thirds in the fourth quarter of 2021.
US front-month gas futures for March delivery rose 11.1 cents, or 2.6%, to settle at $4.306 per million British thermal units (mmBtu) their highest close since Feb. 4.
In the spot market, frigid weather and high heating demand in the US Northeast this year have 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 average gas output in the US Lower 48 states fell from a record 97.3 bcfd in December to 94.0 bcfd in January and 92.5 bcfd so far in February as cold weather froze oil and gas wells in several producing regions.
On a daily basis, however, gas output soared to 95.2 bcfd on Feb. 11, its highest since Jan. 1. Output has been rising almost daily since it dropped to 86.3 bcfd during a winter storm on Feb. 4, its lowest since February 2021.
Even though the weather is forecast to be colder than previously expected, it is still on track to be less cold next week than this week with the coming of spring-like weather in some areas.
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