U.S. natural gas futures jumped about 5% on Monday, putting the contract on track for its highest close in 13 years, on forecasts for higher heating demand than previously expected and as much higher global gas prices keep U.S. liquefied natural gas (LNG) exports near record highs.
Front-month gas futures rose 30.4 cents, or 4.8%, to $6.582 per million British thermal units at 9:37 a.m. EDT (1337 GMT), putting the contract on track for its highest close since December 2008.
That U.S. price increase came even though global crude futures dropped about 4% and European gas futures held steady.
U.S. gas futures have soared about 74% so far this year with much higher prices in Europe keeping demand for U.S. LNG near record highs as several countries try to wean themselves off Russian gas after Russia invaded Ukraine on Feb. 24.
Russia calls its action in Ukraine a “special military operation.”
Traders noted one of the more surprising observations about the recent U.S. price run-up is that while U.S. gas prices have soared about 40% over the past month, European gas, which was currently trading around $33 per mmBtu, fell about 23% as Russia keeps sending supplies via pipeline and LNG vessels keep delivering cargoes.
Analysts said that in addition to high LNG demand, U.S. prices were rising on domestic concerns, including growing worries that cooler weather in April will keep heating demand high enough to prevent utilities from adding much gas into storage. U.S. gas stockpiles were currently around 17% below the five-year (2017-2021) average for this time of year.
With LNG exports near record highs, U.S. gas speculators last week boosted their net long futures and options positions on the New York Mercantile and Intercontinental Exchanges for a third week in a row for the first time since July 2021, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.
In the spot market, gas prices at the AECO hub in Alberta, Canada, rose to their highest since February 2021 as homes and businesses crank up their heaters.
AccuWeather forecast high temperatures in Calgary, the biggest city in the province, would remain below freezing for much of this week. That compares with a normal high of around 51 degrees Fahrenheit (10.6 Celsius) in the city at this time of year.
Traders noted that Alberta’s cold, which will likely reach the United States next week, would reduce gas exports from Canada to the United States this week.
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 projected average U.S. gas demand, including exports, would rise from 95.4 billion cubic feet per day (bcfd) this week to 97.2 bcfd next week as some of the unseasonably cold air in Alberta moves into the United States next week. Those forecasts were higher than Refinitiv’s outlook on Friday.