U.S. natural gas futures jumped almost 5% on Monday on forecasts for colder weather and higher heating demand over the next two weeks than previously expected.
In addition, U.S. prices gained support from a European gas where prices jumped 9% on cooler weather and after a monthly auction showed that Russian gas giant Gazprom PAO had not booked any additional gas transit capacity to Europe for December.
In October, global gas prices hit record highs as utilities around the world scrambled for liquefied natural gas (LNG) cargoes to replenish low stockpiles in Europe and meet insatiable demand in Asia, where energy shortfalls have caused power blackouts in China.
Following those global gas prices, U.S. futures climbed to a 12-year high in early October on expectations LNG demand would remain strong for months. But overseas prices were still trading about six times higher than U.S. futures because the United States has plenty of gas in storage and ample production.
Analysts have said that European inventories were about 20% below normal for this time of year, compared with just 3% below normal in the United States.
In what is starting out like another volatile week of trade, front-month gas futures rose 22.6 cents, or 4.7%, to settle at $5.017 per million British thermal units (mmBtu). On Friday, the contract dropped about 7% to its lowest close since Sept. 7.
Data provider Refinitiv said output in the U.S. Lower 48 states averaged 96.1 billion cubic feet per day (bcfd) so far in November, up from 94.1 bcfd in October and a monthly record of 95.4 bcfd in November 2019.
Refinitiv projected average U.S. gas demand, including exports, would jump from 105.1 bcfd this week to 112.0 bcfd next week as the weather turns colder and homes and businesses crank up their heaters. Those forecasts were higher than Refinitiv projected on Friday.
U.S. exports to Canada averaged 3.0 bcfd so far in November, up from 2.1 bcfd in October, according to Refinitiv data. That compares with an all-time monthly high of 3.5 bcfd in December 2019.
The amount of gas flowing to U.S. LNG export plants, meanwhile, averaged 11.1 bcfd so far in November, up from 10.5 bcfd in October as the sixth train at Cheniere Energy Inc’s Sabine Pass plant in Louisiana started producing LNG in test mode. That compares with a monthly record of 11.5 bcfd in April.
With gas prices near $27 per mmBtu in Europe and $32 in Asia, compared with about $5 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 11.1 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 Venture Global LNG’s Calcasieu Pass in Louisiana starts producing LNG in test mode.