U.S. natural gas futures edged up on Wednesday after soaring about 7% in the prior session on forecasts for higher heating demand this week and expectations a jump in global gas prices will keep demand for U.S. liquefied natural gas (LNG) exports strong.
That price increase came despite near record U.S. output and forecasts for milder weather and lower heating demand next week than previously expected.
In October, global gas prices soared to record highs as utilities scramble for LNG cargoes to refill low stockpiles in Europe and meet rising demand in Asia, where energy shortfalls have caused power blackouts in China. Gas prices in Europe were up about 9% so far on Wednesday.
U.S. futures also climbed in October, reaching a 12-year high early in the month, on expectations LNG demand will remain strong for many months.
Price gains in the United States, however, were restrained compared with overseas because the United States has more than enough gas in storage for winter and ample production to meet domestic and export demand. Prices in Europe and Asia were about four times higher than in the United States.
Analysts expect U.S. gas inventories will top 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 shy of the five-year average of 3.7 tcf.
U.S. stockpiles were currently about 3% below the five-year average for this time of year. In Europe, analysts said stockpiles were about 15% below normal.
Front-month gas futures rose 2.9 cents, or 0.5%, to $5.571 per million British thermal units (mmBtu) at 7:43 a.m. EDT (1143 GMT).
Data provider Refinitiv said output in the U.S. Lower 48 states averaged 95.6 billion cubic feet per day (bcfd) so far in November, up from 94.1 bcfd in October. That compares with a monthly record of 95.4 bcfd in November 2019.
Refinitiv projected average U.S. gas demand, including exports, would drop from 97.8 bcfd this week to 94.4 bcfd next week as the weather turns milder. The forecast for this week was higher and next week was lower than Refinitiv projected on Tuesday.
The amount of gas flowing to U.S. LNG export plants averaged 10.9 bcfd so far in November, up from 10.5 bcfd in October. That compares with a monthly record of 11.5 bcfd in April.
With gas prices near $25 per mmBtu in Europe and $31 in Asia, versus around $6 in the United States, traders said buyers around the world will keep purchasing all the LNG the United States can produce.
But no matter how high global gas prices rise, the United States only has the capacity to turn about 10.5 bcfd of gas into LNG. The rest of the gas flowing to the export plants is used to fuel equipment that produces the 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 start producing LNG in test mode.