U.S. natural gas futures edged up to a 10-week high on Thursday on a preliminary decline in output and forecasts for more power generation and liquefied natural gas (LNG) export demand for gas over the next two weeks than previously expected.
That small increase also came ahead of a federal report expected to show what will likely be the last withdrawal from storage of the winter season.
Analysts forecast U.S. utilities pulled 26 billion cubic feet (bcf) of gas from storage during the week ended April 1. That compares with an increase of 19 bcf in the same week last year and a five-year (2017-2021) average increase of 8 bcf.
If correct, last week’s decline would cut stockpiles to 1.389 trillion cubic feet (tcf), or 16.7% below the five-year average of 1.667 tcf for this time of the year.
U.S. front-month gas futures rose 2.8 cents, or 0.5%, to $6.057 per million British thermal units (mmBtu) at 8:48 a.m. EDT (1248 GMT), putting the contract on track for its highest close since Jan. 27.
U.S. gas futures have soared about 65% so far this year with much higher prices in Europe keeping demand for U.S. LNG near record highs as several countries wean themselves off Russian gas after Moscow invaded Ukraine on Feb. 24, an action Moscow calls a “special military operation.”
European gas, meanwhile, slid about 3% on Thursday to trade around $33 per mmBtu on mild weather and ample LNG imports. U.S. gas prices have moved in the opposite direction of the European market more than half the time since the start of the year.
Record U.S. LNG demand helped keep the front-month in technically overbought territory with a relative strength index (RSI) over 70 for a seventh day in a row for the first time since September, and boosted the 12-month futures strip to its highest since January 2009.
Cooler weather in Mid-Atlantic states caused next-day gas prices at the Dominion South hub in Pennsylvania to jump to $5.94 per mmBtu for Thursday, its highest since February 2021.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 94.5 billion cubic feet per day (bcfd) so far in April from 93.7 bcfd in March. That compares with a monthly record of 96.3 bcfd in December.
On a daily basis, output on Thursday was on track to drop 0.8 bcfd to 93.3 bcfd due mostly to declines along the Gulf Coast and Appalachia, according to preliminary Refinitiv data. That preliminary data, however, has shown similar declines in recent days that were later revised much lower.
Refinitiv projected average U.S. gas demand, including exports, would drop from 99.1 bcfd this week to 94.2 bcfd next week as the weather turns seasonally milder. Those forecasts were higher than Refinitiv’s outlook on Wednesday due to expected higher gas use by power generators and LNG export facilities.
The amount of gas flowing to U.S. LNG export plants fell from a record 12.9 bcfd in March to 12.4 bcfd so far in April due to declines at the Corpus Christi and Freeport facilities in Texas. The United States can turn about 13.2 bcfd of gas into LNG.