U.S. natural gas futures jumped about 9% to a one-month high on Monday on forecasts for colder weather and more heating demand in mid to late November than previously expected.
Traders also said futures gained support from a drop in output so far this month and expectations the Freeport liquefied natural gas (LNG) export plant in Texas would return to service soon.
Freeport LNG submitted a draft Root Cause Failure Analysis to the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) on Nov. 1, according to sources familiar with the filing. By the end of last week, however, Freeport LNG had not yet submitted a request to resume service.
Freeport LNG has said it still expects the 2.1-billion-cubic-feet-per-day (bcfd) export plant to return to at least partial service in early to mid-November following an unexpected shutdown on June 8 caused by a pipeline explosion.
Several vessels were lined up to pick up LNG from Freeport, according to Refinitiv data. Prism Brilliance, Prism Diversity and Prism Courage were waiting offshore from the plant, while LNG Rosenrot and Prism Agility were expected in late November.
Front-month gas futures rose 56.4 cents, or 8.8%, to $6.964 per million British thermal units (mmBtu) at 8:58 a.m. EDT (1258 GMT), putting the contract on track for its highest close since Oct. 6.
Rapid price changes over the past couple of weeks – futures gained or lost over 5% on eight of the past 10 days – boosted the contract’s 30-day implied volatility index to its highest since October 2021. The market uses implied volatility to estimate likely price changes in the future.
With gas prices up for two weeks in a row, speculators last week cut their net short futures and options positions on the New York Mercantile and Intercontinental Exchanges for the first time in three weeks to their lowest since late September, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.
In the spot market, meanwhile, unusually warm weather so far in November, pressured power prices in New England and Texas to their lowest since 2021, and gas prices in New England, Pennsylvania, New York and Chicago to their lowest since 2020.
Overall, gas futures were still up about 86% so far this year as much higher global gas prices feed demand for U.S. exports due to supply disruptions and sanctions linked to Russia’s invasion of Ukraine.
Gas was trading at $33 per mmBtu at the Dutch Title Transfer Facility (TTF) in Europe and $29 at the Japan Korea Marker (JKM) in Asia.
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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 that average gas output in the U.S. Lower 48 states fell to 98.3 bcfd so far in November, down from a record 99.4 bcfd in October. Traders, however, noted that early-month output figures were usually revised higher later in the month.
With the coming of seasonally colder weather, Refinitiv projected average U.S. gas demand, including exports, would jump from 98.9 bcfd this week to 122.8 bcfd next week. The forecast for this week was lower than Refinitiv’s outlook on Friday, while its forecast for next week was higher.
The average amount of gas flowing to U.S. LNG export plants rose to 11.7 bcfd so far in November, up from 11.3 bcfd in October.
That is still well below the monthly record of 12.9 bcfd in March due mostly to the ongoing outage at Freeport. The seven big U.S. export plants can turn about 13.8 bcfd of gas into LNG.