U.S. natural gas futures climbed about 2% to a fresh eight-month high on Friday on lower output, rising exports and expectations that seasonally cooler weather will boost heating demand in coming weeks.
Also supporting prices, workers at U.S. energy firm Chevron’s two liquefied natural gas (LNG) export plants in Western Australia voted to restart strikes. Australia was the world’s biggest LNG exporter in 2022, according to data from LSEG.
If those strikes reduce the amount of Australia exports, global LNG prices will rise, including in the U.S., which is on track to become the world’s biggest LNG exporter in 2023.
Elsewhere, the Electric Reliability Council of Texas (ERCOT), which operates the power grid in much of Texas, said a solar eclipse will pass across the region on Oct. 14, reducing the amount of solar power available for several hours in the middle of the day.
Energy traders, however, noted the overall impact of the lost solar power would be reduced in part because the eclipse was coming on a weekend when the shutdown of many businesses and government offices already reduces demand.
Over the past year, solar provided about 7% of the total power generated in ERCOT. Gas provided about 45%. Usually when solar power declines, the grid relies on gas-fired generators to make up for it.
Front-month gas futures for November delivery on the New York Mercantile Exchange rose 5.3 cents, or 1.7%, to $3.219 per million British thermal units at 9:39 a.m. EDT (1339 GMT), putting the contract on track for its highest close since Jan. 24 for a second day in a row.
That kept the front-month in technically overbought territory, with a relative strength index (RSI) above 70, for a second day in a row for the first time since June.
After rising for four days in a row, the contract was up about 9% for the week, after gaining 11% last week.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the lower 48 U.S. states slid to 102.1 billion cubic feet per day (bcfd) so far in October, down from 102.9 bcfd in September and a monthly record high of 103.1 bcfd in August.
With seasonally cooler weather coming, LSEG forecast U.S. gas demand, including exports, would rise from 94.6 bcfd this week to 95.1 bcfd next week and 96.5 bcfd in two weeks. The forecast for next week was lower than LSEG’s outlook on Thursday.
Pipeline exports to Mexico rose to an average of 7.3 bcfd so far in October, up from a record 7.2 bcfd in September, according to LSEG data.
Analysts expect exports to Mexico to rise even higher in coming months once New Fortress Energy’s plant in Altamira starts pulling in U.S. gas to turn into liquefied natural gas (LNG) for export.
Gas flows to the seven big U.S. LNG export plants rose to 12.8 bcfd so far in October, up from 12.6 bcfd in September, but remained well below a record high of 14.0 bcfd in April.
Energy traders said they expected total LNG feedgas to rise close to record levels over the next week or so after Berkshire Hathaway Energy’s 0.8-bcfd Cove Point facility in Maryland exits a maintenance outage. Cove Point shut around Sept. 20. Analysts at LSEG have said the plant usually shuts for about three weeks of maintenance each autumn.
(Reporting by Scott DiSavino; Editing by Alexander Smith)