U.S. natural gas futures eased on Monday on rising output and forecasts for milder weather and lower heating demand next week than previously expected.
Meteorologists forecast weather in the United States would remain milder than normal through at least early April, which should keep heating demand low and allow utilities to start injecting gas into storage this 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 on the New York Mercantile Exchange (NYMEX) fell 6.1 cents, or 1.3%, to $4.802 per million British thermal units (mmBtu) at 9:08 a.m. EDT (1308 GMT).
With the winter heating season coming to an end, U.S. gas speculators last week cut their net long futures and options positions on the NYMEX and Intercontinental Exchanges for a sixth week in a row to their lowest since June 2020, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.
That demand decline cut interest in trading gas, causing total U.S. gas futures volume on the NYMEX to drop to 183,230 contracts on March 18, the lowest since December 2015. That compares with a daily average of 378,160 contracts traded over the past year.
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 constrained by limited capacity.
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 export much more of the supercooled fuel.
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 18.3 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 93.2 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 slightly cooler weather next week, Refinitiv projected average U.S. gas demand, including exports, would rise from 96.7 bcfd this week to 97.6 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 12.82 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. The rest of the gas flowing to the plants is used to operate the facilities.
On a daily basis, LNG feedgas hit a record 13.8 bcfd on Saturday, topping the prior record of 13.4 bcfd on March 1.