U.S. natural gas futures rose more than 2% on Tuesday, helped by forecasts for cooler weather and higher heating demand over the next two weeks and a 10% jump in European gas futures that could keep U.S. liquefied natural gas exports near record highs.
Front-month gas futures rose 12 cents, or 2.7%, to $4.551 per million British thermal units (mmBtu) by 9:48 a.m. EST (1448 GMT).
“It’s been the combination of the cold weather and of course the tensions between Russia and Ukraine that’s helping,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. “From a global perspective with natural gas prices in Europe so strong, it’s going to keep upward pressure on U.S. prices.”
Data provider Refinitiv estimated 383 heating degree days (HDDs) over the next two weeks in the Lower 48 U.S. states. The normal is 358 HDDs for this time of year.
Refinitiv projected average U.S. gas demand, including exports, would rise from 119.9 bcfd this week to 123.2 bcfd next week as temperatures drop. European prices rose as tensions between Russia and Ukraine escalated after Moscow ordered troops into two breakaway regions in eastern Ukraine.
Britain on Tuesday imposed sanctions on Gennady Timchenko and two other billionaires with close links to Vladimir Putin, while Germany halted the Nord Stream 2 Baltic Sea gas pipeline project, designed to double the flow of Russian gas direct to Germany.
The United States and Europe have said they would sanction Russia if it invaded Ukraine. This could prompt Russia to cut exports to Europe, where Russia provides around 30%-40% of gas supplies, about 16.3 billion cubic feet per day (bcfd) in 2021.
Refinitiv said the amount of gas flowing to U.S. LNG export plants has averaged 12.6 bcfd so far in February, which would top January’s monthly record of 12.4 bcfd.
“We expect a strong desire to beef up inventories through Asia and Europe during the coming months to maintain US LNG exports at a capacity pace regardless of Ukrainian developments,” advisory firm Ritterbusch and Associates said in a note.
Refinitiv said average gas output in the U.S. Lower 48 states fell from a record 97.3 bcfd in December to 94.0 bcfd in January and 93.2 bcfd so far in February, as cold weather froze oil and gas wells in several producing regions earlier in the new year.