U.S. natural gas futures gained about 3% on Wednesday as global oil and gas prices surged and forecasts rose for U.S. gas demand over the next two weeks.
Oil prices jumped about 4% following unexpected drawdowns in U.S. crude and fuel stocks, and as the U.S. dollar edged off recent gains.
The gas price increase came the day the October contract expired, even as Hurricane Ian caused over 500,000 customers to lose power in Florida, which should cut demand for gas from electrical power generators.
The U.S. National Hurricane Center noted catastrophic storm surge, winds and flooding in the Florida Peninsula. At 2 p.m. EDT (1800 GMT), Ian was about 25 miles (40 kilometers) west northwest of Fort Myers, Florida, packing maximum sustained winds of 155 miles per hour.
Analysts said storms tend to cut demand than supply since they knock out power and can cause liquefied natural gas (LNG) export terminals to shut. Only about 2% of U.S. gas production comes from the federal offshore Gulf of Mexico, with most coming from shale basins like the Permian in West Texas and the Marcellus in Pennsylvania.
About 308,000 customers in Puerto Rico still lacked power, as did 93,000 in Nova Scotia after Hurricane Fiona battered the U.S. island and the Canadian province.
Also weighing on gas prices, demand was expected to decline in October when the Cove Point LNG plant in Maryland shuts for a couple weeks of maintenance. Cove Point consumes about 0.8 billion cubic feet per day (bcfd) of gas.
U.S. gas use has been reduced for months by the outage at the Freeport LNG export plant in Texas, the second-biggest U.S. LNG export plant. It was consuming about 2 bcfd of gas before it shut on June 8. Freeport LNG expects the facility to return to at least partial service in early to mid-November.
On its last day as the front-month, gas futures for October delivery on the New York Mercantile Exchange (NYMEX) rose 21.7 cents, or 3.3%, to settle at $6.868 per million British thermal units (mmBtu). On Tuesday, the contract closed at its lowest since July 14.
Futures for November, the next front-month, were up about 2% at $6.93 per mmBtu.
U.S. futures remained up about 84% as global gas prices have soared, feeding demand for U.S. exports due to supply disruptions and sanctions linked to Russia’s Feb. 24 invasion of Ukraine.
Gas was trading around $58 per mmBtu in Europe and $41 in Asia. That was an 11% gain for prices in Europe on concerns Russia could stop gas exports to Europe.
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 – have averaged just 1.3 bcfd so far in September, down from 2.5 bcfd in August and 10.8 bcfd in September 2021.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 98.8 bcfd so far in September from a monthly record of 98.0 bcfd in August.
With cooler autumn weather coming, Refinitiv projected average U.S. gas demand, including exports, would slip from 91.1 bcfd this week to 88.6 bcfd next week. Those forecasts were higher than Refinitiv’s outlook on Tuesday.