U.S. natural gas futures edged up about 2% to a fresh one-week high on Thursday on forecasts for cooler weather and higher heating demand than previously expected and as U.S. liquefied natural gas (LNG) exports remain near record highs.
That price increase came ahead of a federal report expected to show last week’s storage draw was bigger than usual due to the record LNG exports.
Analysts forecast U.S. utilities pulled 73 billion cubic feet (bcf) of gas from storage during the week ended March 11. That compares with a decline of 16 bcf in the same week last year and a five-year (2017-2021) average decline of 65 bcf.
If correct, last week’s withdrawal would cut stockpiles to 1.446 trillion cubic feet (tcf), or 17.1% below the five-year average of 1.744 tcf for this time of the year.
Overall, however, traders said temperatures were mostly expected to remain at above-normal levels through late March, which should allow utilities to start injecting gas into storage next week – about a week earlier than usual.
With Russia’s invasion of Ukraine stoking global energy supply concerns, European gas was trading about seven times higher than U.S. futures, keeping demand for U.S. LNG exports at or near record highs. Russia is the world’s second-biggest gas producer after the United States.
U.S. gas futures remain shielded from global 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 will not be able to produce much more of the supercooled fuel anytime soon.
Before Russia’s Feb. 24 Ukraine invasion, the United States worked with other countries to ensure gas supplies, mostly from LNG, would keep flowing to Europe. Russia usually provides around 30% to 40% of Europe’s gas, which totaled about 18.0 billion cubic feet per day (bcfd) in 2021.
U.S. front-month gas futures rose 8.6 cents, or 1.8%, to $4.834 per million British thermal units by 8:50 a.m. EDT (1250 GMT), putting the contract on track for its highest close since March 7 for a second day in a row.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states was on track to rise to 93.1 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 milder spring weather coming, Refinitiv projected average U.S. gas demand, including exports, would drop from 109.6 bcfd this week to 96.0 bcfd next week. Those forecasts were higher than Refinitiv’s outlook on Wednesday.
The amount of gas flowing to U.S. LNG export plants rose to 12.73 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 12.7 bcfd of gas into LNG.