U.S. natural gas futures were little changed on Monday as forecasts for less cold weather and lower heating demand offset massive gains in overseas gas and crude prices on worries that escalating sanctions against Russia over its invasion of Ukraine will disrupt global energy supplies.
Traders said the U.S. market continued to mostly shrug off what was happening in Europe, where gas prices jumped about 17% on Monday.
Before Russia’s invasion, the United States worked with other countries to ensure that gas supplies, mostly LNG, would keep flowing to Europe. Russia usually provides around 30% to 40% of Europe’s gas, which totaled about 16.3 billion cubic feet per day (bcfd) in 2021.
So far this year, the U.S. gas market has focused more on domestic weather and supply and demand rather than geopolitics. U.S. gas prices have followed European futures only about 40% of the time so far in 2022, down from about two-thirds of the time in the fourth quarter of 2021.
After weeks of near-record volatility, front-month gas futures for April delivery on the New York Mercantile Exchange (NYMEX) remained unchanged at $4.469 per million British thermal units (mmBtu) at 9:34 a.m. EST (1434 GMT).
U.S. oil prices, meanwhile, jumped over 8% earlier on Monday as Western allies imposed more sanctions on Russia.
Ahead of Russia’s invasion of Ukraine last week, U.S. speculators cut their net long futures and options positions on the NYMEX and Intercontinental Exchanges for a third week in a row to their lowest since January, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.
For the month, U.S. gas futures were on track to drop about 8% in February after rising 31% in January.
Data provider 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 93.3 bcfd so far in February, as cold weather froze oil and gas wells in several producing regions earlier in the new year.
On a daily basis, however, gas production climbed on most days since dropping to 86.3 bcfd during a winter storm on Feb. 4. Output on Monday was on track to hit 93.4 bcfd.
With warmer weather coming, Refinitiv projected average U.S. gas demand, including exports, would drop from 122.7 bcfd this week to 109.5 bcfd next week. Those forecasts were lower than Refinitiv’s outlook on Friday.
The amount of gas flowing to U.S. LNG export plants averaged 12.4 bcfd so far in February, which would match January’s monthly record high.
Traders expect U.S. LNG exports will keep hitting fresh records in coming months as new liquefaction trains at Venture Global LNG’s Calcasieu Pass export plant in Louisiana enter service. A tanker arrived at Calcasieu on Feb. 7 and will likely leave with the plant’s first cargo in coming days.
Traders said demand for U.S. LNG would remain strong so long as global gas prices keep trading well above U.S. futures as utilities around the world scramble for cargoes to meet surging demand in Asia and replenish low inventories in Europe, especially with the threat that Russia could cut gas supplies to Europe.