U.S. natural gas futures hit a two-week high on Monday on forecasts of warmer-than-usual weather in the next two weeks, which could increase cooling demand and keep storage injections lower than normal.
U.S. front-month gas futures for June delivery was up 20.9 cents to $7.453 per million British thermal units at 12:11 p.m EDT (1611 GMT). Prices earlier hit a peak not seen since April 19 at $7.553 per mmBtu.
“The fear for this market is we’re going to flip a switch and go from winter, which is heating degree days to cooling degree days overnight… Supplies are below average,” said Phil Flynn, an analyst at Price Futures Group.
There also are expectations that the United States is going to continue to export record amounts of LNG, further lending support to prices, Flynn added.
According to data provider Refinitiv, temperatures over the next two weeks are estimated to be slightly warmer than usual with 84 cooling degree days (CDDs) projected, compared with a 30-year average of 64 CDDs for the period.
CDDs, used to estimate demand to cool homes and businesses, measure the number of degrees a day’s average temperature is above 65 degrees Fahrenheit (18 degrees Celsius).
U.S. gas futures have soared nearly 100% 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 Moscow invaded Ukraine on Feb. 24.
European Union energy ministers on Monday held crisis talks on Moscow’s demand that foreign buyers pay for gas in roubles or lose their supply, while the bloc prepares a ban on Russian oil, with possible exemptions for some wary countries.
Russia supplies 40% of the EU’s gas and 26% of its oil imports.
Gas was trading around $34.5 per mmBtu in Europe and $24.53 in Asia.
The U.S. gas market, however, remains mostly shielded from those much higher global prices because the United States is the world’s top gas producer, with all the fuel it needs for domestic use while capacity constraints inhibit exports of more LNG no matter how high global prices rise.
Refinitiv said average gas output in the U.S. Lower 48 states rose to 94.5 billion cubic feet per day (bcfd) in April from 93.7 bcfd in March. That compares with a monthly record of 96.3 bcfd in December 2021.
“Production growth, although has been delayed over time, I think it is around the corner and you’re gonna start to see production volumes pick up over the summer months,” said Daniel Myers, market analyst at Gelber & Associates in Houston, adding that it could reduce the current storage deficit and limit price increases.