U.S. natural gas futures rose almost 4% on Thursday to a near two-week high 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 price increase came despite near record U.S. gas production and ahead of a federal report expected to show mild weather last week, enabling utilities to remove less gas from storage than is usual for this time of the year.
Analysts forecast U.S. utilities pulled 86 billion cubic feet (bcf) of gas from storage during the week ended Dec. 10. That compares with a decline of 118 bcf in the same week last year and a five-year (2016-2020) average decline of 114 bcf.
If correct, last week’s withdrawal would reduce stockpiles to 3.419 trillion cubic feet (tcf), which would be 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 rose 14.1 cents, or 3.7%, to $3.943 per million British thermal units (mmBtu) at 6:34 a.m. EST (1134 GMT), putting the contract on track for its highest close since Dec. 3.
Global gas prices have 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 over $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 came 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.