U.S. natural gas futures eased on Friday with a slow rise in output and forecasts for less heating demand over the next two weeks than previously expected, which should allow utilities to start injecting gas into storage next week – about a week earlier than usual.
That U.S. price decline came even as global demand for gas to replace Russian fuel after its invasion of Ukraine keeps U.S. liquefied natural gas (LNG) exports near record highs and European gas prices about seven times over U.S. futures.
Russia is the world’s second-biggest gas producer after the United States.
U.S. front-month gas futures were down 7.9 cents, or 1.6%, to $4.911 per million British thermal units (mmBtu) at 9:09 a.m. EDT (1309 GMT). On Thursday, the contract closed at its highest since March 4.
That put the front-month up about 4% for the week after it fell about 6% last week.
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 invasion of Ukraine, 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.
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.
Refinitiv projected average U.S. gas demand, including exports, would drop from 109.7 bcfd this week to 95.4 bcfd next week as temperatures climb before rising to 98.3 bcfd in two weeks when cooler weather returns. The forecast for next week was lower than Refinitiv’s outlook on Thursday.
The amount of gas flowing to U.S. LNG export plants has risen to 12.72 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.
Traders said U.S. LNG exports would remain near record levels so long as global gas prices trade 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 Russia could cut European supplies.
Gas stockpiles in Western Europe (Belgium, France, Germany and the Netherlands) were about 38% below the five-year (2017-2021) average for this time of year, according to Refinitiv. That compares with inventories about 17% below normal in the United States.
Gas futures traded near $34 per mmBtu in Europe and $36 in Asia, compared with around $5 in the United States.