U.S. natural gas futures eased on Monday on forecasts for less cold weather and lower heating demand next week than previously expected.
That price decline came even though soaring global oil and gas prices kept demand for U.S. liquefied natural gas (LNG) exports strong as the Russia-Ukraine conflict stokes energy supply concerns.
U.S. gas futures, however, remain shielded from record European prices because the United States, the world’s biggest gas producer, has all the fuel it needs for domestic use and the country’s ability to export more gas as liquefied natural gas (LNG) is limited by capacity constraints.
The United States is already producing LNG near full capacity, so no matter how high global gas prices rise, the U.S. can’t produce much more of the supercooled fuel. So far on Monday, European futures were up about 37% from Friday’s record close, putting European prices about 18 times over U.S. futures.
Since the start of the year, the U.S. gas market has mostly shrugged off what was happening in Europe, focusing more on domestic weather and supply and demand, with U.S. gas prices moving in the opposite direction of Europe more than half the time.
But it has been hard for the U.S. market to ignore recent massive gains in global energy prices. Since Russia invaded Ukraine on Feb. 24, European gas futures have spiked over 220% and were at a record high, while U.S. crude futures jumped as much as 42% to their highest since 2008.
Before the Russian invasion, the United States worked with other countries to ensure that gas supplies, mostly from LNG, would keep flowing to Europe. Russia, the world’s second-biggest gas producer, usually provides around 30% to 40% of Europe’s gas, which totaled about 16.3 billion cubic feet per day (bcfd) in 2021.
Front-month gas futures fell 4.8 cents, or 1.0%, to $4.968 per million British thermal units at 9:27 a.m. EST (1427 GMT). On Friday, the contract closed at its highest since Feb. 2.
Despite the spike in gas prices overseas, U.S. speculators last week cut their net long futures and options positions on the New York Mercantile and Intercontinental Exchanges for a fourth week in a row for the first time since November, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report. Those net long positions were now at their lowest since January.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states was on track to rise to 93.6 bcfd in March from 92.5 bcfd in February as more oil and gas wells return to service after freezing earlier in the year. That compares with a monthly record of 96.2 bcfd in December.
With the coming of colder weather next week, Refinitiv projected average U.S. gas demand, including exports, would rise from 109.8 bcfd this week to 115.1 bcfd next week. The forecast for next week, however, was lower than Refinitiv’s outlook on Friday.
The amount of gas flowing to U.S. LNG export plants rose to 12.60 bcfd so far in March from 12.43 bcfd in February and a record 12.44 bcfd in January. The United States only has the capacity to turn about 12.5 bcfd of gas into LNG. The rest of the fuel flowing to the facilities is used to operate the plant.