U.S. natural gas futures eased about 1% on Friday as rising output caused the market to take a break after prices soared 5% in the prior session to their highest close in 13 years.
U.S. gas futures have already soared about 69% so far this year with much higher prices in Europe keeping demand for U.S. liquefied natural gas (LNG) near record highs as several countries try to wean themselves off Russian gas after Moscow invaded Ukraine on Feb. 24.
The Kremlin calls its action in Ukraine a “special military operation.”
U.S. front-month gas futures fell 8.1 cents, or 1.3%, to settle at $6.278 per million British thermal units (mmBtu). On Thursday, the contract closed at its highest since December 2008.
Record LNG demand also boosted the 12-month U.S. gas futures strip to $6.44 per mmBtu, its highest since January 2009, and helped keep the U.S. front-month in technically overbought territory with a relative strength index (RSI) over 70 for an eighth day in a row for the first time since July 2021.
For the week, the front-month gained about 10%, putting it up for a fourth week in a row for the first time since October.
“Perhaps one of the more surprising observations that can be made during this run-up is that while domestic gas prices have rallied significantly… international prices have remained stagnant,” analysts at Gelber & Associates said in a report.
European gas futures, which are currently trading around $32 per mmBtu, dropped about 50% over the past month, while U.S. futures jumped about 40% during that time.
“This suggests that much of the volatility in Henry Hub price movement actually stemmed from domestic tightness rather than through pressures from abroad,” Gelber said.
That “domestic tightness” includes growing worries that cooler weather expected in coming weeks will keep heating demand high enough to prevent utilities from adding much gas into storage this month. U.S. gas stockpiles were already about 17% below the five-year (2017-2021) average for this time of year.
Despite recent gains, the U.S. gas market remains mostly shielded from much 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.
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.
Refinitiv projected average U.S. gas demand, including exports, would drop from 99.4 bcfd this week to 95.0 bcfd next week as the weather turns seasonally milder before rising to 95.9 bcfd in two weeks with a brief cool down. The forecasts for this week and next were higher than Refinitiv’s outlook on Thursday.
The amount of gas flowing to U.S. LNG export plants slid 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.