U.S. natural gas futures held steady on Friday on minor changes in weather and demand forecasts for the next two weeks from previous outlooks.
That lack of price movement came even as the amount of gas flowing to U.S. liquefied natural gas (LNG) export plants remained on track to hit a record high for a second month in a row in April after Freeport LNG’s export plant in Texas exited an eight-month outage in February.
Front-month gas futures fell 0.6 cents, or 0.3%, to $2.243 per million British thermal units at 9:42 a.m. EDT (1342 GMT).
That left the contract up about 6% for the week after gaining 5% last week.
Data provider Refinitiv said average gas flows to the seven big U.S. LNG export plants rose to 14.1 billion cubic feet per day (bcfd) so far in April, up from a record 13.2 bcfd in March.
The seven big U.S. LNG export plants can turn about 13.8 bcfd of gas into LNG. LNG plants can pull in a little more gas than they can turn into LNG because they use some of the fuel to power equipment used to produce LNG.
Some analysts have begun to question whether low gas prices in Europe and Asia after mild winters left massive amounts of gas in storage could force U.S. LNG exporters to cancel cargoes again this summer. In 2020, at least 175 LNG shipments were canceled due to oversupply and weak demand.
“In Europe, storage is tracking near 2020 levels, leading to some concern that prices could follow 2020’s path, with spreads between global and U.S. prices narrowing to close export arbs (arbitrage) and shut LNG exports to prevent a global storage containment issue,” analysts at Bank of America said in a note.
Gas stockpiles in northwestern Europe – Belgium, France, Germany and the Netherlands – were currently about 56% of capacity, keeping the amount of gas in storage about 63% above its five-year (2018-2022) average for this time of year, according to data provider Refinitiv.
That is much healthier than U.S. gas inventories, which were currently about 21% above their five-year norm.
To ensure that Europe has enough gas for the winter heating season, the European Union wants utilities to refill stockpiles during the summer injection season to 90% of capacity by Nov. 1.
Analysts at ClearView Energy Partners, a research firm, noted “a scenario where European storage fills much earlier than last year and Asian demand growth does not materialize could reduce LNG margins further, potentially resulting in the cancellation of (U.S. LNG) cargoes once again.”
Currently, however, the “window for shipping U.S. LNG to Asia and Europe remains open,” ClearView said.
Gas was trading near a 21-month low of $13 per mmBtu at the Dutch Title Transfer Facility (TTF) in Europe and a 22-month low of $12 at the Japan Korea Marker (JKM) in Asia.
SUPPLY AND DEMAND
U.S. gas futures lag far behind global prices because the U.S. is the world’s top producer with all the fuel it needs for domestic use, while capacity constraints and the June 2022-February 2023 Freeport outage prevented the country from exporting more LNG.
Refinitiv said average gas output in the U.S. Lower 48 states rose to 100.2 bcfd so far in April, up from 99.7 bcfd in March. That compares with a monthly record of 100.4 bcfd in January.
Meteorologists projected the weather in the Lower 48 states would remain mostly colder than normal through May 3 before returning to normal from May 4-6.
With temperatures expected to decline in coming days, Refinitiv forecast U.S. gas demand, including exports, would rise from 95.0 bcfd this week to 96.6 bcfd next week before sliding to 93.4 bcfd in two weeks as the weather turns seasonally milder.