U.S. natural gas futures climbed about 2% on Wednesday with the amount of gas flowing to liquefied natural gas (LNG) export plants back near record highs and forecasts for cooler weather and higher heating demand over the next two weeks than previously expected.
Even though the weather is turning seasonally cooler, meteorologists forecast it is still expected to remain milder than usual through early November, which should keep both heating and cooling demand lower than usual for this time of year.
Traders said that lower than usual demand coupled with record gas output was limiting price gains.
After falling for five days, front-month gas futures for November delivery on the New York Mercantile Exchange rose 5.1 cents, or 1.7%, to $3.130 per million British thermal units (mmBtu) at 8:53 a.m. EDT (1253 GMT) on Wednesday.
On Tuesday, the contract closed as its lowest since Oct. 4 for a second day in a row.
A lack of big price moves in recent weeks has cut historic or actual 30-day close-to-close futures volatility to 49.5%, the lowest since April 2022.
Historic daily volatility hit a record high of 177.7% in February 2022 and a record low of 7.3% in June 1991. Historic volatility has averaged 75.1% so far this year, compared with a record high of 92.8% in 2022 and a five-year (2018-2022) average of 57.9%.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states rose to an average of 103.6 billion cubic feet per day (bcfd) so far in October, up from 102.6 bcfd in September and a record high of 103.1 bcfd in July.
LSEG forecast U.S. gas demand, including exports, would hold near 97.7 bcfd this week and next. The forecast for this week was higher than LSEG’s outlook on Tuesday, while its forecast for next was lower.
Pipeline exports to Mexico slid to an average of 6.9 bcfd so far in October, down from a monthly record high of 7.2 bcfd in September.
Analysts, however, expect exports to Mexico to rise 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 13.5 bcfd so far in October with the return of Berkshire Hathaway Energy’s Cove Point export plant in Maryland, up from 12.6 bcfd in September. That compares with a record high of 14.0 bcfd in April.
On a daily basis, LNG feedgas climbed to 14.6 bcfd on Tuesday, the highest since April 2023.
The U.S. is on track to become the world’s biggest LNG supplier in 2023, ahead of recent leaders Australia and Qatar. Much higher global prices have fed demand for U.S. exports due in part to supply disruptions and sanctions linked to the war in Ukraine.
Gas was trading around $16 per mmBtu at both the Dutch Title Transfer Facility (TTF) benchmark in Europe and $18 at the Japan Korea Marker (JKM) in Asia.
(Reporting by Scott DiSavino; editing by Jonathan Oatis)