U.S. natural gas futures gained about 3% to a fresh 13-year high on Thursday on a reduction in daily output and an increase in fuel flowing to liquefied natural gas (LNG) export plants.
That price gain also occurred ahead of a U.S. report expected to show last week’s storage build was smaller than usual for this time of year as hotter than normal weather boosted the amount of gas power generators burned to produce power for air conditioning.
Analysts forecast U.S. utilities added 89 billion cubic feet (bcf) of gas to storage during the week ended May 20. That compares with an increase of 109 bcf in the same week last year and a five-year (2017-2021) average increase of 97 bcf.
If correct, last week’s increase would boost stockpiles to 1.821 trillion cubic feet (tcf), or 14.9% below the five-year average of 2.139 tcf for this time of the year.
On their last day as the front-month, gas futures for June delivery were up 23.6 cents, or 2.6%, to $9.207 per million British thermal units (mmBtu) at 9:01 a.m. EDT (1301 GMT), putting the contract on track for its highest close since August 2008 for a third day in a row.
That price increase caused futures for June to trade at a premium over July for the first time since the contracts started trading in 2009.
Futures for July, which will soon be the front-month, were up 2.2% to $9.19 per mmBtu.
U.S. gas futures are up about 147% so far this year as much higher prices in Europe and Asia keep demand for U.S. LNG exports strong, especially since Russia’s Feb. 24 invasion of Ukraine stoked fears Moscow might cut gas supplies to Europe.
Despite supply concerns in Europe, U.S. futures have soared about 34% over the past month, while European prices slid about 12% as Russia keeps sending supplies via pipeline and LNG vessels continue to deliver cargoes.
Gas was trading around $27 per mmBtu in Europe and $22 in Asia. With European gas stockpiles filling fast, traders noted LNG tankers may soon turn toward Asia where demand is expected to rise quickly as China starts to ease coronavirus lockdowns. Gas stockpiles in Northwest Europe were only about 10% below the five-year normal versus about 15% in the United States.
U.S. futures, however, continue to 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 additional LNG exports.
In the U.S. spot market, next-day gas for Thursday at several hubs rose to the highest in years, including Dominion South in Pennsylvania at its highest since February 2014, PG&E citygate in Northern California at its highest since February 2019, and Chicago and the Henry Hub benchmark in Louisiana at their highest since hitting record highs during the February freeze of 2021.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states has climbed to 94.9 billion cubic feet per day (bcfd) so far in May from 94.5 bcfd in April, off the monthly record of 96.1 bcfd in November 2021.
On a daily basis, however, output dropped about 2.0 bcfd over the past five days to near a one-month low of 93.7 bcfd due mostly to declines in Texas.
The average amount of gas flowing to U.S. LNG export plants has risen to 12.5 bcfd so far in May from 12.2 bcfd in April. It hit a monthly record of 12.9 bcfd in March. The United States can turn about 13.2 bcfd of gas into LNG.