U.S. natural gas futures jumped more than 6% to a five-week high on Monday on expectations the Northeast region will experience its coldest day of the winter on Tuesday and as soaring global gas prices keep demand for U.S. liquefied natural gas (LNG) strong.
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 less cold weather and lower heating demand through late January than previously expected.
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 U.S. gas futures had risen 26.2 cents, or 6.7%, to $4.178 per million British thermal units (mmBtu) by 8:25 a.m. EST (1325 GMT), putting the contract on track to close at its highest since Dec. 1. That also puts the contract on track for its highest daily percentage gain since late December.
Despite the cold expected on Tuesday in New York and New England, next-day power and gas prices for Monday in both regions slid. On Friday, power and gas prices in both regions jumped to their highest since January 2018.
Speculators, meanwhile, slightly reduced their net long U.S. futures and options positions last week on the New York Mercantile (NYMEX) and Intercontinental Exchanges, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.
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 so far in January, 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.