U.S. natural gas futures gained about 3% to nearly a two-week high on Thursday on a drop in daily output, a rise in crude futures, forecasts for higher gas demand over the next two weeks than previously expected and signs that Freeport LNG’s liquefied natural gas (LNG) export plant in Texas started to pull in more feedgas.
That price increase occurred ahead of a federal report expected to show last week’s storage build was smaller than usual because power generators burned lots of gas to keep air conditioners humming during a lingering heat wave.
Analysts forecast U.S. utilities added 48 billion cubic feet (bcf) of gas into storage during the week ended Sept. 8. That compares with an increase of 74 bcf in the same week last year and a five-year (2018-2022) average increase of 76 bcf.
If correct, last week’s increase would boost stockpiles to 3.196 trillion cubic feet (tcf), or 6.5% above the five-year average of 3.002 tcf for the time of year.
Front-month gas futures for October delivery on the New York Mercantile Exchange were up 6.9 cents, or 2.6%, to $2.749 per million British thermal units at 9:27 a.m. EDT (1327 GMT), putting the contract on track for its highest close since Sept. 1.
Oil prices climbed about 2% on Thursday to their highest levels since November 2022 on forecasts for tighter supplies for the rest of 2023.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the lower 48 U.S. states has eased to 102.2 billion cubic feet per day (bcfd) so far in September, down from a record 102.3 bcfd in August.
Most of that decline occurred this week. On a daily basis, output was on track to drop about 2.8 bcfd over the past four days to a preliminary two-month low of 99.9 bcfd on Thursday. Energy traders noted preliminary data is often revised later in the day.
Meteorologists forecast the weather in the lower 48 states would remain near normal until Sept. 18 before turning mostly warmer than usual in the Sept. 22-29 period. Traders, however, noted that above normal temperatures in late September were not that hot, with averages of around 72 degrees Fahrenheit (22.2 Celsius) versus a normal of 70 F for that time of year.
With seasonally cooler weather coming, LSEG forecast U.S. gas demand, including exports, will slide from 100.5 bcfd this week to 96.2 bcfd next week. Those forecasts were higher than LSEG’s outlook on Wednesday.
Gas flows to the seven big U.S. LNG export plants have averaged 12.6 bcfd so far in September, up from 12.3 bcfd in August. That compares with a monthly record of 14.0 bcfd in April.
On a daily basis, however, LNG feedgas was only on track to reach 12.4 bcfd on Thursday due mostly to a reduction at Freeport LNG this week.
The 2.1-bcfd Freeport facility was on track to pull in about 0.9 bcfd of gas on Thursday, up from an average of 0.3 bcfd over the past four days, according to LSEG data. Sources told Reuters that Freeport had canceled four cargoes since reducing feedgas this week. Last week, the plant was pulling in about 1.8 bcfd of pipeline gas.
Looking ahead, traders noted Berkshire Hathaway Energy’s 0.8-bcfd Cove Point LNG export plant in Maryland was on track to shut for about a week of planned maintenance around Sept. 21-29, according to company notices to customers. Cove Point shuts every year in the autumn for maintenance. In 2022, it shut from around Oct. 1-27, according to LSEG data.
(Reporting by Scott DiSavino; Editing by Paul Simao)