U.S. natural gas futures gained about 6% on Thursday on soaring global gas prices, forecasts for record power demand in Texas and a small decline in U.S. daily output.
That U.S. price increase came despite a reduction in U.S. gas demand this week due in part to the extended 90-day outage at the Freeport liquefied natural gas (LNG) plant in Texas and ahead of a federal report expected to show a bigger-than-usual storage build last week due to a reclassification of stockpiles in California last year.
Analysts forecast U.S. utilities added 91 billion cubic feet (bcf) of gas to storage during the week ended June 10. That compares with an increase of 28 bcf in the same week last year and a five-year (2017-2021) average increase of 79 bcf.
If correct, last week’s increase would boost stockpiles to 2.090 trillion cubic feet (tcf), or 13.6% below the five-year average of 2.418 tcf for this time of the year.
Freeport was shut on June 8 after a pipe burst. Analysts projected the Freeport shutdown would reduce the amount of gas available to the rest of the world, especially in Europe where most U.S. LNG has gone as countries there look to wean themselves off Russian supplies after Moscow invaded Ukraine on Feb. 24.
Gas prices at the Title Transfer Facility in the Netherlands soared by 28% on Thursday.
But leaving more gas in the United States should give utilities a chance to rebuild extremely low stockpiles more quickly. Freeport, the second-biggest U.S. LNG export plant, consumes about 2 billion cubic feet per day (bcfd) of gas, so a 90-day shutdown would result in about 180 bcf more gas being available to the U.S. market.
U.S. storage is currently about 15%, or 340 bcf, below normal levels for this time of year, its lowest since April 2019.
Front-month gas futures for July delivery on the New York Mercantile Exchange (NYMEX) rose 46.8 cents, or 6.3%, to $7.888 per million British thermal units (mmBtu) at 9:07 a.m. EDT (1307 GMT).
That increase boosted the premium of futures for July over August to a record high.
With the U.S. Federal Reserve expected to keep raising interest rates in the coming months to reduce inflation, open interest in NYMEX futures fell to its lowest since September 2016 for a fifth day in a row on Wednesday as investors cut back on risky assets like commodities.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states slid to 94.8 bcfd so far in June from 95.2 bcfd in May. That compares with a monthly record of 96.1 bcfd in December 2021.
With hotter weather coming, Refinitiv projected average U.S. gas demand, including exports, would rise from 92.8 bcfd this week to 94.1 bcfd next week. The forecast for this week was lower than Refinitiv’s outlook on Wednesday.
Power demand in Texas will likely set new all-time highs on Thursday and Monday after breaking the prior record on June 12 as economic growth boosts overall use and homes and businesses keep air conditioners cranked up to escape a lingering heatwave.
The average amount of gas flowing to U.S. LNG export plants fell to 11.6 bcfd so far in June from 12.5 bcfd in May, according to data from Refinitiv. That compares with a monthly record of 12.9 bcfd in March. The seven big U.S. export plants can turn about 13.6 bcfd of gas into LNG.