US natural gas futures rose about 3% to a 10-week high on Thursday on a bigger than expected storage draw, a preliminary decline in output and forecasts for more power generation and liquefied natural gas (LNG) export demand for gas over the next two weeks.
The US Energy Information Administration (EIA) said utilities pulled 33 billion cubic feet (bcf) of gas from storage during the week ended April 1. Analysts said storage withdrawal was due to cold weather last week and was likely the last decrease of the winter heating season.
That was higher than the 26-bcf withdrawal analysts forecast in a Reuters poll and compares with an increase of 19 bcf in the same week last year and a five-year (2017-2021) average increase of 8 bcf.
Last week’s decline cut stockpiles to 1.382 trillion cubic feet (tcf), or 17.1% below the five-year average of 1.667 tcf for this time of the year.
US front-month gas futures rose 15 cents, or 2.5%, to $6.179 per million British thermal units (mmBtu) at 10:37 a.m. EDT (1437 GMT), putting the contract on track for its highest close since Jan. 27.
US gas futures have soared about 65% this year with much higher prices in Europe keeping demand for US LNG near record highs as several countries wean themselves off Russian gas after Moscow invaded Ukraine on Feb. 24, an action Moscow calls a “special military operation.”
European gas slid about 2% to around $33 per mmBtu on mild weather and ample LNG imports.
US gas prices have moved in the opposite direction of the European market more than half the time since the start of the year.
Record US LNG demand helped keep the front-month in technically overbought territory with a relative strength index (RSI) over 70 for a seventh day in a row, and boosted the 12-month futures strip to its highest since January 2009.
Data provider Refinitiv said average gas output in the US Lower 48 states rose to 94.5 billion cubic feet per day (bcfd) so far in April from 93.7 bcfd in March. Output hit a monthly record of 96.3 bcfd in December.
Daily output on Thursday was on track to drop 0.8 bcfd to 93.3 bcfd due mostly to declines along the Gulf Coast and Appalachia, according to preliminary Refinitiv data. Preliminary data in recent days showed declines that were later revised much lower.
Refinitiv projected average US gas demand, including exports, would drop from 99.1 bcfd this week to 94.2 bcfd next week as the weather turns seasonally milder. Those forecasts were higher than Refinitiv’s outlook on Wednesday due to expected higher gas use by power generators and LNG export facilities.
The amount of gas flowing to US LNG export plants fell from a record 12.9 bcfd in March to 12.4 bcfd so far in April due to declines at the Corpus Christi and Freeport facilities in Texas. The United States can turn about 13.2 bcfd of gas into LNG.