U.S. natural gas futures gained more than 4% to a five-week high on Monday on expectations that the Northeast region will experience its coldest day of the winter on Tuesday and as soaring global gas prices bolster demand for U.S. liquefied natural gas (LNG).
In addition, traders noted daily U.S. gas demand in the Lower 48 states jumped to a record high on Friday as cold weather blanketed most of the country.
U.S. prices rose on Monday despite forecasts for warmer weather and lower heating demand than previously expected through late January.
Earlier in the day, European gas futures jumped more than 8% on Monday. U.S. gas futures followed European gas prices about two thirds of the time during the fourth quarter of 2021 as utilities scrambled for LNG cargoes to replenish low stockpiles in Europe and meet surging demand in Asia.
Front-month gas futures rose 16.3 cents, or 4.2%, to settle at $4.079 per million British thermal units (mmBtu), their highest close since Dec. 3.
Despite the cold expected on Tuesday in New York and New England, next-day power and gas prices for Monday eased in both regions. Power and gas prices in both regions jumped on Friday to their highest since January 2018. Some traders said New England power prices rose to about $180 per megawatt hour for Tuesday, which would again be their highest since January 2018.
Lingering cold since New Year’s Day has continued to cause well freeze-offs in several regions, including the Permian in Texas and New Mexico, the Bakken in North Dakota and Appalachia in Pennsylvania, West Virginia and Ohio.
Data provider Refinitiv said those weather-related issues, which are normal during winter months, have cut average output in the U.S. Lower 48 states to 94.6 bcfd so far in January, down from a record 97.6 bcfd in December.
Refinitiv projected average U.S. gas demand, including exports, would slide from 133.7 bcfd this week to 130.2 bcfd next week. Those forecasts were lower than Refinitiv’s outlook on Friday.
On a daily basis, Refinitiv said total U.S. gas demand plus exports hit a preliminary record high of 151.1 bcfd on Jan. 7. That would top the current record of 150.6 bcfd on Jan. 30, 2019, and the 147.2 bcfd hit on Feb. 12, 2021, just before Winter Storm Uri left millions without power and heat for days after freezing gas wells and pipes in Texas and other U.S. Central states.
The amount of gas flowing to U.S. LNG export plants has averaged 12.0 bcfd this month, down from a record 12.2 bcfd in December.
With gas prices around $29 per mmBtu in Europe and $34 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.
No matter how high global gas prices rise, the United States only has capacity to turn about 12.2 bcfd of gas into LNG.
Global markets will have to wait until later this year for some of the 18 liquefaction trains under construction at Venture Global LNG’s Calcasieu Pass in Louisiana to start producing LNG. The plant has been pulling in small amounts of feed gas since around September as it prepares to begin operating.