U.S. natural gas futures soared about 6% to a one-week high on Monday on expectations liquefied natural gas (LNG) exports will rise and forecasts calling for cooler weather and higher heating demand over the next two weeks than previously expected.
Even though the weather will be cooler over the next two weeks, it was still forecast to remain milder than normal through early November.
The U.S. price spike also occurred despite a slight decline in global gas prices and an increase in U.S. gas output.
Global gas futures, however, continue to trade about six times higher than U.S. prices, keeping demand for U.S. LNG exports strong as utilities around the world scramble to refill stockpiles ahead of the winter heating season and meet current energy shortfalls causing power blackouts in China.
Front-month gas futures were up 32.1 cents, or 6.1%, to $5.601 per million British thermal units (mmBtu) at 7:54 a.m. EDT (1154 GMT), putting the contract on track for its highest close sine Oct. 14.
Since U.S. gas futures rose to their highest prices since 2008 in early October, speculators have cut their net long positions on the New York Mercantile and Intercontinental Exchanges to their lowest since July 2020 on growing expectations the United States will have more than enough gas in storage for the winter, according to data from the Commodity Futures Trading Commission (CFTC).
Analysts expect U.S. gas inventories will reach 3.6 trillion cubic feet (tcf) by the start of the winter heating season in November, which they said would be a comfortable level even though it falls short of the 3.7 tcf five-year average.
U.S. stockpiles were currently around 4% below the five-year (2016-2020) average for this time of year. In Europe, analysts say stockpiles were about 15% below normal.
Data provider Refinitiv said output in the U.S. Lower 48 states has risen to an average of 92.2 billion cubic feet per day (bcfd) so far in October, up from 91.1 bcfd in September. That compares with a monthly record of 95.4 bcfd in November 2019.
Refinitiv projected average U.S. gas demand, including exports, would rise from 89.4 bcfd this week to 91.6 bcfd next week as more homes and businesses turn on their heaters. Those forecasts were higher than Refinitiv projected on Friday.
Refinitiv said the amount of gas flowing to U.S. LNG export plants has averaged 10.4 bcfd so far in October, the same as in September, but was expected to rise in coming weeks as some liquefaction trains exit maintenance outages.
With gas prices near $31 per mmBtu in Europe and $33 in Asia, versus almost $6 in the United States, traders said buyers around the world will keep purchasing all the LNG the United States could produce.
But no matter how high global gas prices rise, the United States has the capacity to turn only about 10.5 bcfd of gas into LNG.
Global markets will have to wait until later this year to get more, when the sixth liquefaction train at Cheniere Energy Inc’s Sabine Pass and Venture Global LNG’s Calcasieu Pass in Louisiana are expected to start producing LNG in test mode.