U.S. natural gas futures rose about 2% to a fresh nine-week high on Thursday on forecasts for higher demand over the next two weeks than previously expected.
That small price increase came ahead of a federal report expected to show U.S. utilities injected gas into storage for the first time in 2022 as mild weather last week cut heating demand.
But with the return of colder weather this week, analysts said utilities will likely pull gas from storage again.
Analysts forecast U.S. utilities injected 21 billion cubic feet (bcf) of gas into storage during the week ended March 25. That compares with an increase of 7 bcf in the same week last year and a five-year (2017-2021) average decline of 23 bcf.
If correct, last week’s build would boost stockpiles to 1.410 trillion cubic feet (tcf), or 15.0% below the five-year average of 1.659 tcf for this time of the year.
Front-month gas futures rose 11.1 cents, or 2.0%, to $5.716 per million British thermal units (mmBtu) at 9:51 a.m. EDT (1351 GMT), putting the contract on track for its highest close since Jan. 27 for a second day in a row.
The front-month was up about 29% so far in March, its biggest monthly gain since it rose about 31% in January.
For the quarter, futures were up about 53%, their biggest quarterly gain since rising about 61% in the third quarter of 2021.
U.S. gas futures have climbed in recent months as soaring global gas prices keep U.S. liquefied natural gas (LNG) exports near record highs on concerns Russia could stop delivering gas to Europe as European countries boost sanctions against Moscow following Russia’s invasion of Ukraine on Feb. 24.
The U.S. gas market however remains mostly shielded from those higher global prices because the United States, the world’s top gas producer, has all the fuel it needs for domestic use, and the country’s ability to export more LNG is constrained by limited capacity.
Since it cannot produce any more LNG no matter how high global gas prices rise, the United States has agreed to divert some of its LNG exports to Europe to help allies break their dependence on Russian gas.
Russia, the world’s second-biggest gas producer, provided about 30-40% 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 has risen to 93.4 bcfd so far in March, up from 92.5 bcfd in February, as more oil and gas wells return to service after freezing over the winter. That compares with a monthly record of 96.2 bcfd in December.
Refinitiv projected average U.S. gas demand, including exports, would drop from 105.8 bcfd this week to 97.0 bcfd next week as the weather turns milder. Those forecasts were higher than Refinitiv’s outlook on Wednesday.
The amount of gas flowing to U.S. LNG export plants has risen to 12.86 bcfd so far in March, up from 12.43 bcfd in February and a monthly record of 12.44 bcfd in January. The United States can turn about 13.1 bcfd of gas into LNG.