U.S. natural gas futures rose about 2% on Wednesday to a fresh one-week high on a drop in daily output over the past few days and forecasts for more demand next week than previously expected.
Power demand in Texas hit a monthly record high on Tuesday and was on track to break that on Wednesday as homes and businesses keep their air conditioners cranked up to escape a spring heatwave.
U.S. front-month gas futures for June delivery rose 14.5 cents, or 1.8%, to $8.449 per million British thermal units (mmBtu) at 9:02 a.m. EDT (1302 GMT), putting the contract on track for its highest close since May 5 for a second day in a row. On May 5, the front-month settled at a 13-year high of $8.783.
U.S. gas futures have gained about 128% 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.
U.S. gas prices lag far behind global prices because the United States is the world’s top producer, with all the gas it needs for domestic use while capacity constraints inhibit exports of more LNG.
In the spot market, hotter-than-normal weather in Northern California caused next-day gas prices at the PG&E Citygate to rise to their highest since February 2019.
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 1.6 bcfd over the past three days to a three-week preliminary low of 93.7 bcfd on Wednesday.
Refinitiv projected average U.S. gas demand, including exports, would hold near 89.7 bcfd this week and next. The forecast for next week was higher than Refinitiv’s outlook on Tuesday.
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 cannot produce much more LNG 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 7.6 bcfd on Tuesday from about 7.9 bcfd on Monday 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 13% 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 37% of full capacity.
That is healthier than U.S. inventories, which were around 16% below their five-year norm, because high European gas prices have kept LNG imports strong while Russia keeps supplying fuel via pipeline.