US natgas futures jump over 5% on short covering

CHICHAGO: US natural gas futures climbed more than 5% on Friday, helped by a bout of short covering following the recent slide below the key $2 technical level and forecasts for slightly colder weather than previously expected.

Front-month gas futures for May delivery on the New York Mercantile Exchange (NYMEX) rose 10.7 cents, or 5.3%, to settle at $2.114 per million British thermal units (mmBtu). The contract has risen 5.2% so far this week, after dropping 9.2% last week.

“There’s a lot of fundamental and technical support around the $2.00 mark so any positive news coming out of the weather outlooks which shifted slightly cooler and we’re up,” said Gary Cunningham, director of market research at Tradition Energy.

Data provider Refinitiv forecast that U.S. gas demand, including exports, would rise from 93.3 billion cubic feet per day (bcfd) this week to 94.8 bcfd next week.

However, “the market is also keeping an eye on outages at some of the LNG terminals. That’s certainly going to help pull gas demand back here” Cunningham said.

Refinitiv estimated that average gas output in the U.S. Lower 48 states has risen to 100.1 billion cubic feet per day (bcfd) so far in April, up from 98.7 bcfd in March. That compares with a monthly record of 100.4 bcfd in January 2023.

Prices fell 4% in the last session. For the week, prices are up about 5.2% so far.

“We are maintaining a view that a $1 price handle will prove too tempting for well-capitalized major hedge accounts or funds to ignore with some scale-down speculative buying likely especially if export demand improves and gas production further stalls,” Ritterbusch and Associates said in a note.

Refinitiv estimated 117 heating degree days (HDDs) over the next two weeks in the Lower 48 U.S. states. Those forecasts were higher than Refinitiv’s outlook on Thursday.

HDDs estimate demand to heat homes and businesses by measuring the number of degrees a day’s average temperature is below 65 degrees Fahrenheit (18 degrees Celsius).

The U.S. Energy Information Administration (EIA) said on Thursday utilities put a near-normal 25 billion cubic feet (bcf) of gas into storage last week. That compares with an 8 bcf injection during the same week a year ago and a five-year (2018-2022) average rise of 28 bcf.

The Biden administration on Thursday approved exports of liquefied natural gas from the Alaska LNG project, a document showed, as the United States competes with Russia to ship natural gas from the Arctic to Asia.