U.S. natural gas futures edged up about 1% on Wednesday on forecasts for colder than previously expected weather and higher heating demand over the next two weeks and as record amounts of gas continued to flow to U.S. liquefied natural gas (LNG) export plants.
That small price increase came ahead of record output that should enable utilities to keep injecting gas into storage through late November, instead of pulling gas out of storage to meet heating demand as usual.
The U.S. Energy Information Administration (EIA) will release its weekly storage report on Wednesday, one day ahead of its usual Thursday schedule due to the Thanksgiving Day holiday.
Analysts forecast U.S. utilities added 4 billion cubic feet (bcf) of gas into storage during the week ended Nov. 17 when warmer than usual weather kept heating demand low.
That compares with a withdrawal of 60 bcf in the same week last year and a five-year (2018-2022) average decline of 53 bcf.
If correct, last week’s increase would boost stockpiles to 3.840 trillion cubic feet (tcf), or 7.4% above the five-year average of 3.577 tcf for the time of year.
Front-month gas futures for December delivery on the New York Mercantile Exchange rose 1.6 cents, or 0.6%, to $2.862 per million British thermal units (mmBtu) at 9:41 a.m. EST (1441 GMT).
On Tuesday, the contract closed at its lowest since Oct. 2 for a second day in a row.
With production at record highs and ample amounts of gas in storage, the futures market is sending signals that some traders have given up hope of seeing winter price spikes from November through March.
The premium of futures for January over December fell to 14 cents per mmBtu, its lowest since November 2022 for a fourth day in a row.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states rose to 107.5 billion cubic feet per day (bcfd) so far in November, up from a record 104.2 bcfd in October.
Meteorologists projected the weather would swing from warmer than normal now to colder than normal from Nov. 24-Dec. 1 before turning warmer than normal again from Dec. 3-7.
With colder weather coming, LSEG forecast U.S. gas demand in the Lower 48 states, including exports, would jump from 112.8 bcfd this week to 130.5 bcfd next week. Those forecasts were higher than LSEG’s outlook on Tuesday.
Gas flows to the seven big U.S. LNG export plants rose to an average of 14.3 bcfd so far in November, up from 13.7 bcfd in October and a monthly record of 14.0 bcfd in April.
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 $14 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe and $16 at the Japan Korea Marker (JKM) in Asia.
(Reporting by Scott DiSavino; Editing by Alexander Smith)