U.S. natural gas futures jumped about 10% to a two-week high on Monday on forecasts for more demand this week than previously expected with the return of Berkshire Hathaway Energy’s Cove Point liquefied natural gas (LNG) export plant in Maryland.
Traders said the market largely ignored record output and forecasts for milder weather and less demand next week than previously expected, which should allow utilities to keep injecting gas into storage longer than usual through at least mid-November.
The market was also still waiting for the return of Freeport LNG’s 2.1-billion-cubic-feet-per-day (bcfd) export plant in Texas. Freeport has said it expects the facility to return to at least partial service in early- to mid-November following an unexpected shutdown on June 8 due to a pipeline explosion.
At least four vessels were already lined up to pick up LNG at Freeport, according to Refinitiv data. Prism Brilliance and Prism Diversity were waiting off the coast from the plant, while Prism Courage was expected to arrive on Nov. 1 and Grace Freesia on Nov. 27.
Front-month gas futures were up 56.8 cents, or 10.0%, to $6.252 per million British thermal units (mmBtu) at 8:46 a.m. EDT (1246 GMT), putting the contract on track for its highest close since Oct. 14.
That also put the front-month on track for its biggest daily percentage increase since mid-July when it rose by 14%.
For the month, the contract was on track to decline about 7% after falling about 26% last month.
With gas prices down for nine of the past 10 weeks, speculators last week boosted their net short futures and options positions on the New York Mercantile and Intercontinental Exchanges for a second week in a row to their highest since March 2020, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.
Despite recent weeks of declines, U.S. gas futures are still up about 68% 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 $27 per mmBtu at the Dutch Title Transfer Facility (TTF) in Europe and $30 at the Japan Korea Marker (JKM) in Asia. That put TTF on track for its lowest close since mid-June. TTF closed at a record high of $90.91 on Aug. 25.
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 have prevented the country from exporting more LNG.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states has risen to 99.5 bcfd so far in October, up from a monthly record of 99.4 in September.
With the coming of seasonally cooler weather, Refinitiv projected average U.S. gas demand, including exports, would rise from 98.3 bcfd this week to 101.2 bcfd next week. The forecast for this week was higher than Refinitiv’s outlook on Friday, while its forecast for next week was lower.
The average amount of gas flowing to U.S. LNG export plants has slid to 11.3 bcfd so far in October due to the Cove Point outage, down from 11.5 bcfd in September. That is well below the 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.
During the first nine months of 2022, roughly 60%, or 6.3 bcfd, of U.S. LNG exports went to Europe, as shippers diverted cargoes from Asia to fetch higher prices. Last year, just 29%, or about 2.8 bcfd, of U.S. LNG exports went to Europe.