U.S. natural gas futures held near a seven-week high for a third day on Thursday as the market waits for direction from a federal report expected to show a smaller-than-usual storage withdrawal during milder than normal weather last week.
That lack of U.S. price movement came even as rising global demand for gas to replace Russian fuel after the country’s invasion of Ukraine keeps U.S. liquefied natural gas (LNG) exports near record highs and European gas prices about eight times over U.S. futures.
Analysts forecast U.S. utilities pulled 56 billion cubic feet (bcf) of gas from storage during the week ended March 18. That compares with a decline of 29 bcf in the same week last year and a five-year (2017-2021) average decline of 62 bcf.
If correct, last week’s withdrawal would cut stockpiles to 1.384 trillion cubic feet (tcf), or 17.7% below the five-year average of 1.682 tcf for this time of the year.
Even though it will be cooler next week, meteorologists forecast U.S. weather will remain near normal through early April, which should keep heating demand low enough to allow utilities to inject gas into storage this week – about a week earlier than usual. Supply and demand forecasts next week, however, were about even, and utilities will likely leave stockpiles little changed.
U.S. front-month gas futures remained unchanged at $5.228 per million British thermal units (mmBtu) at 8:50 a.m. EDT (1250 GMT). On Wednesday, the contract closed at it highest since Feb. 2 for a second day in a row.
That kept the front-month in technically overbought territory with a relative strength index (RSI) over 70 for a second day in a row for the first time since September 2021.
The premium of futures for May over April, meanwhile, rose to a record high over 5 cents per mmBtu.
The U.S. market remains mostly shielded from higher 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. European gas jumped about 8% to around $39 per mmBtu on Thursday on worries Russia could cut supplies after demanding payment for gas in roubles. Russia is the world’s second-biggest gas producer, after the United States.
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 has provided 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 93.3 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 cooler weather coming, Refinitiv projected average U.S. gas demand, including exports, would rise from 97.0 bcfd this week to 102.3 bcfd next week. The forecast for this week was higher and the forecast for next week was lower than Refinitiv’s outlook on Wednesday.
The amount of gas flowing to U.S. LNG export plants rose to 12.78 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.
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 35% 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.