U.S. natural gas futures edged up on Thursday on forecasts for more domestic heating demand over the next two weeks than previously expected.
That small increase came ahead of a federal report expected to show last week’s storage withdrawal was bigger than usual due to near record liquefied natural gas (LNG) exports.
U.S. LNG exports were near record highs because global oil and gas prices have soared to record or near record highs in recent weeks after Russia invaded Ukraine, stoking energy supply concerns. Russia is the world’s second biggest producer of gas behind the United States.
After soaring to an all-time high over $106 per million British thermal units (mmBtu) on Monday, European gas futures have dropped 11% so far on Thursday after collapsing 30% on Wednesday as supplies of the fuel stabilized with continued high flows from Russia and massive LNG imports from around the world, prompting traders to keep taking profits.
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 usually provides around 30% to 40% of Europe’s gas, which totaled about 16.3 billion cubic feet per day (bcfd) in 2021.
Analysts forecast U.S. utilities pulled 117 billion cubic feet (bcf) of gas from storage during the week ended March 4. That compares with a decline of 59 bcf in the same week last year and a five-year (2017-2021) average decline of 89 bcf.
If correct, last week’s withdrawal would cut stockpiles to 1.526 trillion cubic feet (tcf), or 15.6% below the five-year average of 1.809 tcf for this time of the year.
In the United States, front-month gas futures rose 6.6 cents, or 1.5%, to $4.592 per mmBtu at 8:40 a.m. EST (1340 GMT).
U.S. gas futures remain shielded from record European prices because the United States has all the fuel it needs for domestic use and the country’s ability to export more 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, it would not be able to produce much more of the supercooled fuel any time soon.
Since U.S. LNG exports were already near maximum capacity, some analysts said soaring global energy prices would actually cause American gas prices to decline as U.S. drillers seek more oil supplies. That would boost the amount of associated gas that comes out of the ground with that oil.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states was on track to rise to 93.4 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.
Refinitiv projected average U.S. gas demand, including exports, would hold around 112.0 bcfd this week and next. Those forecast were higher than Refinitiv’s outlook on Wednesday.
The amount of gas flowing to U.S. LNG export plants rose to 12.58 bcfd so far in March from 12.43 bcfd in February and a record 12.44 bcfd in January. The United States 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.