U.S. natural gas futures rose about 2% on Thursday on forecasts for colder weather and higher heating use over the next two weeks, and as record gas prices in Europe and Asia keep demand for U.S. liquefied natural gas (LNG) exports strong.
That U.S. price increase occurred despite near record-high U.S. gas production and an expected, smaller-than-usual storage withdrawal last week due to mild weather.
The U.S. Energy Information Administration (EIA) said utilities pulled 88 billion cubic feet (bcf) of gas from storage during the week ended Dec. 10.
That was close to the 86-bcf decline that analysts had forecast in a Reuters poll and compared with a draw of 118 bcf in the same week last year and a five-year (2016-2020) average decline of 114 bcf.
Last week’s withdrawal reduced stockpiles to 3.417 trillion cubic feet (tcf), or 1.8% below the five-year average of 3.481 tcf for this time of the year.
Looking ahead, many analysts said milder-than-normal weather in December will cause U.S. utilities to leave enough gas in storage to allow stockpiles to reach above-normal levels in a week or two, the first above-normal storage levels since April.
Front-month gas futures were up 7.9 cents, or 2.1%, to $3.881 per million British thermal units at 10:37 a.m. EST (1537 GMT).
Global gas prices have repeatedly soared to all-time highs over the last few months as utilities around the world scrambled for LNG cargoes to replenish low stockpiles in Europe and meet surging demand in Asia, where energy shortfalls caused power blackouts in China.
U.S. futures jumped to a 12-year high of more than $6 per mmBtu in early October, but have retreated because the United States has plenty of gas in storage and ample production for winter. Overseas prices were trading about 11 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.
Data provider Refinitiv said output in the U.S. Lower 48 states has averaged 96.56 billion cubic feet per day (bcfd) so far in December, just over November’s monthly record of 96.54 bcfd.
Refinitiv projected average U.S. gas demand, including exports, would jump from 109.4 bcfd this week to 118.8 bcfd next week as the weather turns seasonally colder. The forecast for next week was higher than Refinitiv’s outlook on Wednesday.
The amount of gas flowing to U.S. LNG export plants has averaged 11.8 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.
This month’s record-setting LNG feed gas occurred despite reductions this week at Sabine Pass and Freeport LNG’s export plant in Texas.
With gas prices around $44 per mmBtu in Europe and $43 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.