U.S. natural gas futures rose about 2% on Thursday from a near three-month low in the prior session on forecasts for colder weather that should boost heating demand over the next two weeks.
That price increase came ahead of a federal report expected to show last week’s build would be much bigger than usual – over 100 billion cubic feet (bcf) – for a fourth week in a row due to mild weather and an increase in wind power that reduced the amount of gas power generators needed to burn to produce electricity.
Wind power produced about 9% of the nation’s electricity last week, up from as little as 6% a few weeks earlier, according to federal energy data.
Analysts forecast that U.S. utilities added 123 billion cubic feet (bcf) of gas to storage during the week ended Oct. 7. That compares with an increase of 86 bcf in the same week last year and a five-year (2017-2021) average increase of 82 bcf.
If correct, last week’s increase would push stockpiles to 3.229 trillion cubic feet (tcf), or 6.5% below the five-year average of 3.452 tcf for this time of the year.
The price increase also came even though gas output was near record levels and recent reductions in liquefied natural gas (LNG) exports that should allow utilities to keep injecting more gas into storage than usual in coming weeks.
Major LNG outages include Berkshire Hathaway Energy’s shutdown of its 0.8-billion-cubic-feet-per-day (bcfd) Cove Point LNG export plant in Maryland for about three weeks of planned maintenance on Oct. 1 and the ongoing shutdown of Freeport LNG’s 2.0-bcfd plant in Texas for unplanned work after an explosion on June 8. Freeport expects the facility to return to at least partial service in early to mid-November.
Front-month gas futures rose 10.4 cents, or 1.6%, to $6.539 per million British thermal units (mmBtu) at 7:55 a.m. EDT (1155 GMT). On Wednesday, the contract matched its close on Oct. 10, which was the lowest settle since July 12.
In a bet on cold weather next winter, traders boosted the premium of futures for November 2023 over October 2023 to 37 cents, its sixth record high in a row.
U.S. futures were up about 75% so far this year as soaring global gas prices feed demand for U.S. exports due to supply disruptions and sanctions linked to Russia’s Feb. 24 invasion of Ukraine.
Gas was trading at $45 per mmBtu in Europe and $35 in Asia. Prices in Europe fell to a three-month low of $44.25 on Oct. 7 as strong LNG imports boosted the amount of gas in storage in northwest countries to over 90% of capacity. That compares with an all-time high of $90.91 on Aug. 25.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states has risen to 99.9 bcfd so far in October, up from a monthly record of 99.4 bcfd in September.
With colder weather coming, Refinitiv projected average U.S. gas demand, including exports, would jump from 92.6 bcfd this week to 98.3 bcfd next week. Those forecasts were similar to Refinitiv’s outlook on Wednesday.
The average amount of gas flowing to U.S. LNG export plants fell to 10.9 bcfd so far in October from 11.5 bcfd in September. 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.