U.S. natural gas futures edged up on Friday to a nine-week high as soaring global prices kept demand for U.S. liquefied natural gas (LNG) exports at record highs.
Traders also noted that one last blast of cool weather this week likely prompted utilities to pull gas from storage again after mild weather last week allowed them to inject fuel into stockpiles. After this week, however, the weather is expected to turn seasonally mild and storage injections should resume.
Front-month gas futures rose 7.8 cents, or 1.4%, to settle at $5.720 per million British thermal units (mmBtu), their highest close since Jan. 27 for a third day in a row.
That put the contract up about 3% this week after gaining about 15% last week.
Analysts at Mizuho, a bank, said strong global demand for LNG exports in recent months has boosted the U.S. 12-month futures strip to $5.69 per mmBtu, its highest since February 2010.
The premium of futures for June over May rose over 7 cents per mmBtu to the highest on record, according to data going back to 2009 when the contracts started trading.
U.S. gas futures have climbed in recent months as soaring global prices keep demand for U.S. LNG exports near record highs. Prices in March were the highest for that month in eight years – Russia calls its actions in Ukraine a “special operation.”
European gas was down about 7% on Friday to around $37 per mmBtu on relief that Russia would not immediately cut off supplies while Europe works on meeting Moscow’s demand for payment in roubles.
So far this year, the U.S. gas market has followed European prices less than half the time, shielded from much higher global prices because the United States, the world’s top gas producer, has all the fuel it needs for domestic use while capacity constraints limit its ability to export LNG.
Since the United States cannot produce more LNG no matter how high prices rise, the country has agreed to divert some LNG exports to Europe to help allies break dependence on Russian gas.
Russia, the world’s No. 2 gas producer, provided about 30%-40% of Europe’s gas in 2021, about 18.3 billion cubic feet per day (bcfd).
Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 93.7 bcfd in March from 92.8 bcfd in February, as more wells returned to service after freezing over the winter. That compares with a monthly record of 96.3 bcfd in December.
Refinitiv projected average U.S. gas demand, including exports, would drop from 106.2 bcfd this week to 96.7 bcfd next week and 93.1 bcfd in two weeks as the weather turns seasonally milder. Those forecasts were similar to Refinitiv’s outlook on Thursday.
The amount of gas flowing to U.S. LNG export plants rose to a monthly record of 12.86 bcfd in March from 12.43 bcfd in February and the prior all-time high of 12.44 bcfd in January. The United States can turn about 13.2 bcfd of gas into LNG.