U.S. natural gas futures climbed about 4% to a one-week high on Friday on forecasts for higher demand next week than previously expected and as record amounts of gas flow to liquefied natural gas (LNG) export plants.
That price increase came despite record gas production and forecasts for mild weather and lower heating demand in two weeks that should allow utilities to keep pulling less gas from storage than usual through the end of December.
Analysts forecast there was currently around 8.7% more gas in storage than usual for this time of year.
Front-month gas futures for January delivery on the New York Mercantile Exchange (NYMEX) rose 8.3 cents, or 3.5%, to $2.475 per million British thermal units (mmBtu) at 9:55 a.m. EST (1455 GMT), putting the contract on track for its highest close since Dec. 8.
That gain – the third daily price increase in a row – pushed the front-month out of technically oversold territory for the first time in eight days.
The contract, however, was still down about 4% this week, putting it down for a sixth week in a row for the first time since February.
Record production and ample gas in storage has been weighing on futures prices for weeks and has prompted some traders to guess that prices already peaked this winter (November-March) in November.
Investor interest in trading gas has increased in recent weeks with open interest in NYMEX futures on Dec. 13 at a 26-month high of 1.423 million contracts and shares outstanding in the U.S. Natural Gas Fund (UNG) at a record 197.9 million contracts. UNG is an Exchange Traded Fund (ETF) designed to track the daily price movements of gas.
Analysts, meanwhile, said they expect prices to rise in coming years as demand for the fuel grows as new LNG export plants enter service in the U.S., Canada and Mexico.
But expected delays at LNG export plants being built by Exxon Mobil /QatarEnergy at Golden Pass in Texas and Venture Global LNG at Plaquemines in Louisiana have caused some analysts to reduce their forecasts for gas prices and demand in 2024.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states rose to 108.5 bcfd so far in December from a record 108.3 bcfd in November.
Meteorologists projected the weather would remain mostly warmer than normal through at least Dec. 30.
But even though the weather will remain mild, LSEG forecast U.S. gas demand in the Lower 48, including exports, would rise from 125.1 bcfd this week 127.7 bcfd next week with the usual seasonal cooling at this time of year before sliding to 124.1 bcfd during the last week of the year when many businesses and government offices shut for the Christmas holiday.
The forecast for next week was higher than LSEG’s outlook on Thursday.
Gas flows to the seven big U.S. LNG export plants rose to an average of 14.5 bcfd so far in December, up from a record 14.3 bcfd in November.
(Reporting by Scott DiSavino)