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U.S. natural gas futures jumped about 4% on Thursday to a fresh 13-year high as hot spring weather boosted air conditioning demand, while much higher global prices kept demand for U.S. liquefied natural gas (LNG) exports strong.

Traders said the increased domestic and export demand limits the amount of gas utilities can inject into storage for next winter. U.S. stockpiles were currently about 16% below normal for this time of year despite last week’s near-normal injection.

“Besides a big storage deficit, natural gas is also bid on the assumption the U.S. effort to supply the European Union (EU) with LNG … will ultimately leave less gas for domestic consumption, as spare capacity and new production gets scooped up by desperate customers on the other side of the Atlantic,” said Robert Yawger, executive director of energy futures at Mizuho.

U.S. front-month gas futures for June delivery rose 36.8 cents, or 4.4%, to settle at $8.783 per million British thermal units (mmBtu), their highest close since August 2008 for a third day in a row.

Earlier in the week, U.S. gas futures followed oil prices higher after the EU proposed a phased embargo on Russian oil in response to Moscow’s Feb. 24 invasion of Ukraine.

Analysts said the proposed oil embargo increased the possibility the EU will also ban Russian gas in the future.

US natgas futures up as cooling demand starts to rise

In the spot market, meanwhile, gas prices in several parts of the United States and Canada soared this week as power generators burned more of the fuel to meet higher air conditioning demand during an early spring heatwave in the U.S. South and West.

U.S. gas futures have already gained about 136% so far this year as higher global prices kept demand for U.S. liquefied natural gas (LNG) exports near record highs since Russia invaded Ukraine. Gas was trading around $34 per mmBtu in Europe and $24 in Asia.

The U.S. gas market, however, remains mostly shielded from those much higher global prices because the United States is the world’s top gas producer, with all the fuel it needs for domestic use while capacity constraints inhibit exports of more LNG no matter how high global prices rise.

Data provider Refinitiv said average gas output in the U.S. Lower 48 states has slid to 94.0 billion cubic feet per day (bcfd) so far in May from 94.5 bcfd in April. That compares with a monthly record of 96.1 bcfd in November 2021.

Refinitiv projected average U.S. gas demand, including exports, would slide from 90.8 bcfd this week to 89.9 bcfd next week as the weather turns seasonally milder. The forecast for next week was lower than Refinitiv’s outlook on Wednesday.

The amount of gas flowing to U.S. LNG export plants has held around 12.2 bcfd so far in May, the same as in April, and down from a record 12.9 bcfd in March. The United States can turn about 13.2 bcfd of gas into LNG.

Since the United States will not be able to produce much more LNG anytime soon, it has worked with allies to divert LNG exports from elsewhere to Europe to help EU countries and others break their dependence on Russian gas.

Russia, the world’s second-biggest gas producer, has provided about 30%-40% of Europe’s gas, totaling about 18.3 bcfd in 2021.

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