U.S. natural gas futures slid about 4% on Thursday on an expected decline in flows to liquefied natural gas (LNG) export plants and ahead of a federal report expected to show last week’s storage build was near normal due to moderate weather.
That decline in LNG feed gas – likely due to spring maintenance at some Gulf Coast facilities – and the U.S. price decline occurred despite a 20% jump in European futures due to a drop in Russian gas flows after the shutdown of a pipe in Ukraine and worries Russian sanctions on some European energy firms could lead to further gas supply disruptions.
Analysts forecast U.S. utilities added 79 billion cubic feet (bcf) of gas to storage during the week ended May 6. That compares with an increase of 70 bcf in the same week last year and a five-year (2017-2021) average increase of 82 bcf.
If correct, last week’s increase would boost stockpiles to 1.646 trillion cubic feet (tcf), or 15.8% below the five-year average of 1.955 tcf for this time of the year.
U.S. front-month gas futures for June delivery were down 31.9 cents, or 4.2%, to $7.321 per million British thermal units (mmBtu) at 9:01 a.m. EDT (1301 GMT).
Despite recent declines, U.S. gas futures are still up about 95% so far this year as higher global prices have kept demand for U.S. LNG exports strong since Russia’s Feb. 24 invasion of Ukraine. Gas was trading around $33 per mmBtu in Europe and $23 in Asia. The U.S. contract rose to a 13-year high near $9 on May 6.
The U.S. gas market remains mostly shielded from those 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.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states has climbed to 94.7 billion cubic feet per day (bcfd) so far in May from 94.5 bcfd in April. That compares with a monthly record of 96.1 bcfd in November 2021.
Refinitiv projected average U.S. gas demand, including exports, would slide from 90.5 bcfd this week to 89.5 bcfd next week. The forecast for next week was lower than Refinitiv’s outlook on Wednesday due to the decline in LNG feedgas.
On a daily basis, feed gas to U.S. LNG plants was on track to drop to a near four-week low of 11.7 bcfd due mostly to a decline at Cheniere Energy Inc’s Corpus Christi plant in Texas.
Since the United States will not be able to produce much more LNG anytime soon, it has worked with allies to divert LNG exports from elsewhere to Europe to help European Union (EU) countries and others break their dependence on Russian gas.
Russia exported about 8.5 bcfd of gas to Europe on Wednesday on the three mainlines into Germany – North Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route – down from 9.0 bcfd on Tuesday and an average of around 11.9 bcfd in May 2021.
Gas stockpiles in Northwest Europe – Belgium, France, Germany and the Netherlands – were about 16% below the five-year (2017-2021) average for this time of year, down from 39% below the five-year norm in mid-March, according to Refinitiv. Storage was currently about 34% of full capacity.
U.S. inventories, meanwhile, were also around 16% below their five-year norm.