U.S. natural gas futures rose about 1% to a fresh 14-year high on Thursday as hot weather boosted spot prices across the country to multiyear highs amid record global gas prices and forecasts for more U.S. demand over the next two weeks than previously expected.
That futures price increase also came ahead of a federal report expected to show a smaller than usual storage build last week when power generators burned lots of gas to keep air conditioners humming during a heat wave.
Analysts forecast U.S. utilities added 34 billion cubic feet (bcf) of gas to storage during the week ended Aug. 12. That compares with an increase of 46 bcf in the same week last year and a five-year (2017-2021) average increase of 47 bcf.
If correct, last week’s increase would boost stockpiles to 2.535 trillion cubic feet (tcf), or 12.2% below the five-year average of 2.886 tcf for this time of the year.
The small storage increase came despite the ongoing outage at the Freeport liquefied natural gas (LNG) export plant in Texas, which has left more gas in the United States for utilities to inject into stockpiles for next winter.
Freeport LNG, the second-biggest U.S. LNG export plant, was consuming about 2 billion cubic feet per day (bcfd) of gas before it was shut on June 8. Freeport expects the plant to return to at least partial service in early October.
Front-month gas futures rose 13.3 cents, or 1.4%, to $9.377 per million British thermal units (mmBtu) by 8:01 a.m. EDT (1201 GMT), putting the contract on track for its highest close since August 2008.
That price increase pushed the front-month into technically overbought territory with a relative strength index (RSI) above 70 for the second time in three days.
In the spot market, gas prices for Thursday rose to their highest since February 2014 at the Dominion South hub in Pennsylvania, February 2021 at the Henry Hub benchmark in Louisiana and February 2019 at the PG&E Gate in Northern California as homes and businesses across the country cranked up their air conditioners.
So far this year, the gas front-month was up about 152% as higher prices in Europe and Asia keep demand for U.S. LNG exports strong. Global gas prices have soared this year following supply disruptions linked to Russia’s invasion of Ukraine on Feb. 24.
Global gas prices were on track to close at record levels around $70 per mmBtu in Europe and $57 in Asia.
Russian gas exports via the three main lines into Germany – Nord Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route – averaged 2.5 bcfd so far in August, down from 2.8 bcfd in July and 10.4 bcfd in August 2021.
U.S. gas futures lag far behind global prices because the United States is the world’s top producer with all the fuel it needs for domestic use, while capacity constraints and the Freeport outage prevent the country from exporting more LNG.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 97.3 bcfd so far in August from a record 96.7 bcfd in July.
With warmer weather expected, Refinitiv projected average U.S. gas demand, including exports, would rise from 95.5 bcfd this week to 96.9 bcfd next week. Those forecasts were higher than Refinitiv’s outlook on Wednesday.
The average amount of gas flowing to U.S. LNG export plants held at 10.9 bcfd so far in August, the same as July. That compares with a monthly record of 12.9 bcfd in March. The seven big U.S. export plants can turn about 13.8 bcfd of gas into LNG.