U.S. natural gas futures rose about 2% to a one-week high on Thursday on forecasts for higher demand over the next two weeks than previously expected.
That small price increase came ahead of a government report on Thursday expected to show a normal withdrawal from stockpiles last week, and the upcoming Good Friday holiday.
It also came despite forecasts for mild weather through mid April, ample amounts of gas in storage and reduced amounts of gas flowing to liquefied natural gas (LNG) export plants due to ongoing repairs at Freeport LNG’s export plant in Texas.
Analysts forecast U.S. utilities pulled 22 billion cubic feet (bcf) of gas from storage during the week ended March 22. That compares with a decrease of 55 bcf in the same week last year and a five-year (2019-2023) average decline of 27 bcf for this time of year.
If correct, that would leave gas stockpiles about 42% above normal levels for this time of year.
Front-month gas futures for May delivery on the New York Mercantile Exchange rose 2.7 cents, or 1.6%, to $1.745 per million British thermal units (mmBtu) at 9:10 a.m. EDT (1310 GMT), putting the contract on track for its highest close since March 19.
Gas prices have been depressed for months – falling to an intraday low of $1.481 per mmBtu on March 26, their lowest since June 2020 – after a mild winter with record output allowed utilities to leave significantly more gas in storage than usual for this time of year.
Low prices should boost U.S. gas use to a record high in 2024 and cut production for the first time since 2020 when the COVID-19 pandemic destroyed demand for the fuel, according to the U.S. Energy Information Administration’s latest outlook.
Output was already down by around 3% over the past month as several energy firms, including EQT and Chesapeake Energy, delayed well completions and cut back on other drilling activities.
In the spot market, mild weather and ample hydro and other renewable power supplies in the U.S. West cut electric prices in California and Arizona to record lows this week.
Next-day power fell to 50 cents per megawatt hour (MWh) at South Path-15 (SP-15) in Southern California and negative $9 at the Palo Verde hub in Arizona, according to data from SNL Energy on the LSEG terminal.
The compares with prior all-time lows of $1.50 per MWh in SP-15 on March 19 and a negative $8 at Palo Verde on March 26.
Negative prices mean there is too much power in a region due to low demand and/or transmission constraints, and are used to encourage power generators to shut plants or pay to keep them running.
SUPPLY AND DEMAND
Financial firm LSEG said gas output in the Lower 48 U.S. states fell to an average of 100.2 billion cubic feet per day (bcfd) so far in March, down from 104.1 bcfd in February. That compares with a monthly record high of 105.5 bcfd in December 2023.
Meteorologists projected weather across the Lower 48 would remain mostly warmer than normal through April 12.
With seasonally warmer weather coming, LSEG forecast gas demand in the Lower 48, including exports, would fall from 113.4 bcfd this week to 106.2 bcfd next week. Those forecasts were lower than LSEG’s outlook on Wednesday.
Gas flows to the seven big U.S. LNG export plants fell to an average of 13.2 bcfd so far in March, down from 13.7 bcfd in February. That compares with a monthly record of 14.7 bcfd in December.
(Reporting by Scott DiSavino, Editing by Nick Zieminski)