NEW YORK: US natural gas futures climbed 3% to a seven-week high on Thursday on forecasts for a return to cooler weather and higher heating demand next week.
That US price increase also came as rising global demand for gas to replace Russian fuel after the country’s invasion of Ukraine keeps US liquefied natural gas (LNG) exports near record highs and European gas prices about eight times over US futures.
The market shrugged off a federal report showing US utilities pulled less gas from storage than expected last week as mild weather kept heating demand low.
Although it will be cooler next week, meteorologists forecast the weather in the United States will remain near normal through early April, which should keep heating demand low enough to allow utilities to inject gas into storage this week - about a week earlier than usual. Supply and demand forecasts next week, however, were about even, and utilities will likely leave stockpiles little changed.
US front-month gas futures rose 16.9 cents, or 3.2%, to settle at $5.401 per million British thermal units (mmBtu), their highest close since Feb. 2 for a third day in a row. The US market remains mostly shielded from higher global prices because the United States has all the fuel it needs for domestic use, and the country’s ability to export more LNG is constrained by limited capacity.
The United States is already producing LNG near full capacity. So, no matter how high global gas prices rise, it will not be able to export much more of the super cooled fuel. European gas jumped about
8% to around $39 per mmBtu earlier on Thursday on worries Russia could cut supplies after demanding payment for gas in roubles. Russia is the world’s second-biggest gas producer, after the United States.
European Union leaders are set to agree at a two-day summit starting on Thursday to jointly buy gas as they seek to cut reliance on Russian fuels, with some saying they would not comply with Moscow’s demand to buy oil and gas using roubles.
Before Russia’s Feb. 24 invasion of Ukraine, the United States worked with other countries to ensure gas supplies, mostly from LNG, would keep flowing to Europe. Russia has provided around 30% to 40% of Europe’s gas, which totaled about 18.3 billion cubic feet per day (bcfd) in 2021.
Data provider Refinitiv said average gas output in the US lower 48 states was on track to rise to 93.3 bcfd in March from 92.5 bcfd in February as more oil and gas wells return to service after freezing earlier in the year. That compares with a monthly record of 96.2 bcfd in December.
With cooler weather coming, Refinitiv projected average US gas demand, including exports, would rise from 97.0 bcfd this week to 102.3 bcfd next week. The forecast for this week was higher and the forecast for next week was lower than Refinitiv’s outlook on Wednesday.
The amount of gas flowing to US LNG export plants rose to 12.78 bcfd so far in March from 12.43 bcfd in February and a record 12.44 bcfd in January. The United States has the capacity to turn about 12.7 bcfd of gas into LNG. The rest of the gas flowing to the plants is used to operate the facilities.
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