U.S. natural gas futures rose about 4% on Tuesday to a one-week high on a preliminary drop in daily output and forecasts for warmer weather and more air-conditioning demand over the next two weeks than previously expected.
Also supporting prices, power demand in Texas was expected to hit a monthly record on Tuesday as homes and businesses crank up their air conditioners to escape another spring heat wave.
U.S. front-month gas futures for June delivery rose 29.2 cents, or 3.7%, to $8.248 per million British thermal units (mmBtu) at 9:13 a.m. EDT (1313 GMT), putting the contract on track for its highest close since May 5 when it settled at its highest since August 2008.
U.S. gas futures were up about 120% since the start of the year as higher global prices kept demand for U.S. liquefied natural gas (LNG) exports strong since Russia’s Feb. 24 invasion of Ukraine.
Gas was trading around $29 per mmBtu in Europe and $20 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 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.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states climbed to 94.8 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.
On a daily basis, however, output was on track to drop 1.9 bcfd to a near three-week preliminary low of 93.5 bcfd on Tuesday due mostly to declines in Pennsylvania. If that drop stands, it would be the biggest one-day decline since freeze-offs shut wells in early February. Preliminary data is often revised.
Refinitiv projected average U.S. gas demand, including exports, would slide from 89.6 bcfd this week to 88.7 bcfd next week. Those forecasts were higher than Refinitiv’s outlook on Monday.
The amount of gas flowing to U.S. LNG export plants held at 12.2 bcfd so far in May, the same as April. That compares with a monthly record of 12.9 bcfd in March. The United States can turn about 13.2 bcfd of gas into LNG.
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.
Russian gas exports to Europe slid to around 7.9 bcfd on Monday from about 8.2 bcfd on Sunday 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. That compares with an average of 11.9 bcfd in May 2021.
Gas stockpiles in Northwest Europe – Belgium, France, Germany and the Netherlands – were about 14% 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 36% of full capacity.
U.S. inventories, meanwhile, were around 16% below their five-year norm.