U.S. natural gas futures rose almost 4% to a fresh one-week high on Monday on forecasts for colder weather and higher demand next week than previously expected and an 11% jump in European gas prices that should keep U.S. liquefied natural gas (LNG) exports near record highs.
Gas prices in Europe soared to their highest since hitting a record in early October on rising demand expectations and renewed concerns that Russia will hold back gas exports to Europe over delays to the startup of Gazprom PAO’s Nord Stream 2 gas pipe from Russia to Germany.
U.S. Secretary of State Antony Blinken said on Sunday that gas is unlikely to flow through Nord Stream 2 if Russia renews its aggression against Ukraine.
Front-month gas futures was up 14.8 cents, or 3.8%, to $4.073 per million British thermal units (mmBtu) at 8:14 a.m. EST (1314 GMT), putting the contract on track for its highest close since Dec. 3 for a second day in a row.
Before the latest price increase, speculators had cut their net long positions on the New York Mercantile and Intercontinental Exchanges for a second week in a row last week to their lowest since June 2020 on expectations the United States will have more than enough gas for the winter heating season.
In recent months, global gas prices hit record highs as utilities around the world scrambled for LNG cargoes from the United States and elsewhere to replenish low stockpiles in Europe and meet surging demand in Asia, where energy shortfalls have caused power blackouts in China.
U.S. futures jumped to a 12-year high in early October but have since pulled back because the United States has plenty of gas in storage and ample production for winter. Overseas prices were currently trading about 10 times higher than U.S. futures.
Analysts have said European inventories were about 20% below normal for this time of year, compared with just 3% below normal in the United States.
Looking ahead, many analysts said milder-than-normal weather expected in the coming weeks will allow U.S. utilities to leave enough gas in storage to cause stockpiles to reach above-normal levels by mid-December. That would be the first time storage would be at above-normal levels since April.
Data provider Refinitiv said output in the U.S. Lower 48 states has averaged 96.6 billion cubic feet per day (bcfd) so far in December, putting it on track to top the monthly record of 96.5 bcfd in November.
Refinitiv projected average U.S. gas demand, including exports, would jump from 110.3 bcfd this week to 123.7 bcfd next week as the weather turns seasonally colder.
The amount of gas flowing to U.S. LNG export plants has averaged 12.0 bcfd so far in December now that the sixth train at Cheniere Energy Inc’s Sabine Pass plant in Louisiana is producing LNG. That compares to 11.4 bcfd in November and a monthly record of 11.5 bcfd in April.
With gas prices around $38 per mmBtu in Europe and $35 in Asia, compared with about $4 in the United States, traders said buyers around the world would keep purchasing all the LNG the United States can produce.