U.S. natural gas futures gained about 2% on Wednesday on forecasts for cooler weather this week and warmer weather next week that should boost demand more than previously expected through early June.
Gas prices also gained support from low amounts of wind power in recent weeks that have forced power generators to burn more gas to produce electricity.
That price increase came despite record U.S. gas output and the return of Canadian exports to levels seen before wildfires in Alberta and other western provinces forced energy firms to shut-in some oil and gas production over the past three weeks.
The amount of U.S. power generated by wind dropped to just 7% of the total so far this week versus a recent high of 17% during the week ended April 21, according to federal energy data. That means there will be less gas available to go into storage.
The amount of power generated by gas has averaged 41% so far this week, up from a recent low of 37% during the windy week ended April 21.
Front-month gas futures for June delivery on the New York Mercantile Exchange rose 5 cents, or 2.2%, to $2.371 per million British thermal units (mmBtu) at 8:58 a.m. EDT (1247 GMT). On Tuesday, the contract closed at its lowest since May 12.
In the spot market, mild weather and ample hydropower in the U.S. West pressured next-day gas prices for Wednesday at the PG&E Citygate in Northern California to $3.43 per mmBtu, the lowest since January 2021.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 101.5 billion cubic feet per day (bcfd) so far in May, which would top April’s monthly record of 101.4 bcfd.
The amount of gas exported from Canada to the United States was on track to hold near a near three-week high of 8.1 bcfd for a second day in a row on Wednesday.
Over the past few weeks, the average amount of gas flowing from Canada to the United States averaged just 7.2 bcfd as wildfires in Alberta and other western provinces caused some producers to shut oil and gas output, according to Refinitiv.
That is well below the 8.3-bcfd average amount of gas Canada exported to the United States since the start of the year and 2022’s average of 9.0 bcfd. About 8% of the gas consumed in, or exported from the United States, comes from Canada.
Meteorologists projected the weather in the Lower 48 states would switch from cooler than normal from May 24-28 to warmer than normal from May 31-June 3 before returning to mostly near normal from June 4-8.
Refinitiv forecast U.S. gas demand, including exports, would ease from 91.2 bcfd this week to 90.5 bcfd next week. Those forecasts were higher than Refinitiv’s outlook on Tuesday.
Gas flows to the seven big U.S. LNG export plants fell from a record 14.0 bcfd in April to an average of 12.9 bcfd so far in May due to maintenance work at several plants, including Cameron LNG in Louisiana and Cheniere Energy Inc’s Sabine Pass in Louisiana.
Last month’s record flows were higher than the 13.8 bcfd of gas the seven big plants can turn into LNG since the facilities also use some of the fuel to power equipment used to produce LNG.