U.S. natural gas futures held near a nine-week high on Monday as forecasts for milder weather over the next two weeks offset early expectations for more demand during that time.
Traders noted U.S. gas prices failed to hold gains from earlier in the day when the market climbed with oil and other energy futures.
U.S. gas futures have risen in recent months – average prices in March hit their highest in eight years – while global gas prices and demand for liquefied natural gas (LNG) soared as several countries seek to wean themselves off Russian gas after Moscow invaded Ukraine on Feb. 24.
Russia calls its actions in Ukraine a “special military operation.”
Front-month gas futures fell 0.8 cents, or 0.1%, to settle at $5.712 per million British thermal units (mmBtu). On Friday, the contract closed at its highest since Jan. 27 for a third day in a row.
That kept the front month in technically overbought territory with a relative strength index (RSI) over 70 for a fourth day in a row and caused the 12-month futures strip to rise to its highest since February 2010 for a second day in a row.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose from 93.7 billion cubic feet per day (bcfd) in March to 94.8 bcfd so far in April 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 98.5 bcfd this week to 93.3 bcfd next week as the weather turns seasonally milder. Those forecasts were higher than Refinitiv’s outlook on Friday.
The amount of gas flowing to U.S. LNG export plants slipped from a record 12.9 bcfd in March to 12.8 bcfd so far in April. The United States can turn about 13.2 bcfd of gas into LNG.
The U.S. gas market remains mostly shielded from higher global prices because the United States, as the world’s top gas producer, has all the fuel it needs for domestic use and capacity constraints limit its ability to export more LNG no matter how high global prices rise.
European gas slipped about 4% on Monday to around $35 per mmBtu on oversupply concerns. So far this year, the U.S. gas market has followed European prices less than half the time.
Since the United States will not be able to produce more LNG soon, the country has worked with allies to divert more LNG exports to Europe to help European Union (EU) countries and others break their dependence on Russian gas.
Russia, the world’s second biggest gas producer, provided about 30%-40% of Europe’s gas in 2021, totaling about 18.3 bcfd. The European Union wants to cut Russian gas imports by two-thirds by the end of 2022 and refill stockpiles to 90% of capacity by Nov. 1.
Gas stockpiles in Western Europe (Belgium, France, Germany and the Netherlands) were about 33% below the five-year (2017-2021) average for this time of year, according to Refinitiv. That is about 22% of full capacity and compares with inventories about 15% below the five-year normal in the United States.