U.S. natural gas futures rose over 5% to a one-week high on Tuesday on forecasts for colder weather and higher heating demand next week than previously expected and expectations that soaring prices in Europe will keep demand for U.S. liquefied natural gas exports strong.
Gas prices in Europe jumped over 8% for a second day in a row on worries Russian gas giant Gazprom PAO will not deliver enough fuel this winter after Germany’s energy regulator suspended the approval process for Gazprom’s Nord Stream 2 gas pipe from Russia to Germany.
Global gas prices hit record highs in October as utilities around the world scrambled for LNG cargoes to replenish extremely 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 17% below normal for this time of year, compared with just 3% below normal in the United States. Commodity trading giant Trafigura warned that Europe is at risk of power outages this winter due to insufficient gas reserves.
After rising almost 5% on Monday, front-month gas futures rose 26.1 cents, or 5.2%, to $5.278 per million British thermal units (mmBtu) at 9:32 a.m. EST (1432 GMT), putting the contract on track for its highest close since Nov. 8.
Despite this week’s price gains, speculators last week cut their net long positions on the New York Mercantile and Intercontinental Exchanges for a sixth week to their lowest since June 2020, according to data from the Commodity Futures Trading Commission (CFTC). Analysts said speculators cut their long positions as the amount of gas in U.S. stockpiles rose to comfortable levels for the winter heating season.
Data provider Refinitiv said output in the U.S. Lower 48 states averaged 96.0 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 to 112.3 bcfd next week from 104.7 bcfd this week as the weather turns colder and homes and businesses crank up their heaters. The forecast for next week was higher than Refinitiv projected on Monday.
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 averaged 11.0 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.