U.S. natural gas futures gained about 4% to a one-week high on Monday on small declines in daily output despite forecasts for milder weather and less demand over the next two weeks than previously expected.
Front-month gas futures for June delivery on the New York Mercantile Exchange were up 9 cents or 4.2%, to $2.227 per million British thermal units (mmBtu) at 9:08 a.m. EDT (1308 GMT), putting the contract on track for its highest close since May 1.
With gas prices down about 11% last week, speculators 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 early April, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.
In the spot market, mild spring weather and a lack of heating or cooling demand pressured next-day power and gas prices for Monday to their lowest in years.
Next-day gas fell to its lowest since October 2020 at the Henry Hub benchmark in Louisiana and its lowest since July 2020 at the Southern California Border.
Next-day power sunk to a record low of $3.25 per megawatt hour (MWh) at the SP-15 hub in Southern California. At the Palo Verde hub in Arizona power prices dropped to their lowest since May 2020, while in New England power prices fell to their lowest since March 2021.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states has risen to 101.6 billion cubic feet per day (bcfd) so far in May, up from a record 101.4 bcfd in April.
On a daily basis, however, output fell to a two-week low of 101.1 bcfd on Saturday.
Meteorologists projected the weather would remain mostly warmer than normal through May 23 with fewer Total Degree Days (TDD) than usual for this time of year.
TDDs measure the number of degrees a day’s average temperature is above or below 65 degrees Fahrenheit (18 degrees Celsius) to estimate demand to cool or heat homes and businesses.
With the warmer weather coming, Refinitiv forecast U.S. gas demand, including exports, would hold near 90.8 bcfd this week and next. Those forecasts were lower than Refinitiv’s outlook on Friday.
Gas flows to the seven big U.S. LNG export plants have slid to an average of 13.1 bcfd so far in May, down from a record 14.0 bcfd in April. The decline was due mostly to reductions at Cameron LNG’s terminal in Louisiana and Cheniere Energy Inc’s facilities at Sabine Pass in Louisiana and Corpus Christi in Texas.
Last month’s record flows were higher than the 13.8 bcfd of gas the seven plants can turn into LNG since the facilities also use some of the fuel to power equipment used to produce LNG.
Some analysts have questioned whether this year’s gas price collapse in Europe and Asia could force U.S. exporters to cancel LNG cargoes this summer after mostly mild weather over the winter left massive amounts of gas in storage. In 2020, at least 175 LNG shipments were canceled due to oversupply and weak demand.
But for now, most analysts say energy security concerns following Russia’s invasion of Ukraine in February 2022 should keep global gas prices high enough to sustain record U.S. LNG exports in 2023.
Gas was trading at a 22-month low of around $12 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe and near a 22-month low of $11 at the Japan Korea Marker (JKM) in Asia.
Even though TTF gas prices were down about 52% and JKM was down about 62% so far this year, traders said global prices were still high enough to keep U.S. LNG exports on track to hit record highs this year.