US natgas prices rise to 8-week high on LNG flows, warm weather

NEW YORK: US natural gas futures edged up to an eight-week high on Thursday on rising flows to liquefied natural gas (LNG) export plants now that Tropical Storm Edouard has passed over the coasts of Texas and Louisiana, and on forecasts for unseasonably warm weather and higher-than-usual air conditioning demand to continue through at least mid-September.

Front-month gas futures for October delivery on the New York Mercantile Exchange rose 3.6 cents, or 1.2percent, to USD2.992 per million British thermal units (mmBtu), putting the contract on track for its highest close since July 9 for a second day in a row.

Recent gains also pushed the front-month into technically overbought territory for the first time in almost three months.

Prices were also supported by expectations a federal report on Thursday will show that hot weather last week caused energy firms to add less gas to storage than usual for this time of year.

Analysts forecast energy firms added 31 billion cubic feet (bcf) of gas to storage during the week ended August 28.

That compares with an increase of 50 bcf during the same week last year and a five-year (2021-2025) average increase of 37 bcf for the period.

Financial firm LSEG said average gas output in the US Lower 48 states rose to 112.9 billion cubic feet per day (bcfd) so far in September, up from a monthly high of 112.2 bcfd in August.

Record output and mild spring weather this year allowed energy firms to keep the amount of gas in inventory higher than the five-year (2021-2025) average since March.

But with hot weather last week, analysts said the amount of gas in storage likely eased to 5.3percent above normal during the week ended August 28 from 5.5percent above normal the previous week, according to estimates ahead of the weekly federal inventory report on Thursday.

Meteorologists forecast the weather will remain mostly warmer than normal through September 18, pushing power generators to continue burning more gas than usual to keep air conditioners running. About 40percent of US power generation comes from gas-fired plants.

LSEG projected average gas demand in the Lower 48 states, including exports, would slide from 112.7 bcfd this week to 108.8 bcfd next week. The forecast for next week was lower than LSEG’s outlook on Wednesday.

Average gas flows to the nine big US LNG export plants rose to 18.0 bcfd so far in September from 17.2 bcfd in August. That is still short of the monthly record high of 18.8 bcfd in April.

The US became the world’s biggest LNG exporter in 2023, surpassing Australia and Qatar, as surging global prices fed demand for more low-cost US gas.

Around the world, gas was trading near 44-month highs of around USD25 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe and USD24 at the Japan-Korea Marker (JKM) benchmark in Asia.

Global gas prices have spiked in recent years primarily due to supply disruptions linked to Russia’s invasion of Ukraine in 2022 and the US-Israeli war with Iran this year.

Prices in the US, however, have not reacted much to the war in Iran because the US produces all the gas it consumes domestically and US LNG companies are already liquefying as much fuel as they can.

No matter how high global gas prices go, the US cannot export much more LNG until units under construction enter service in coming months and years.