U.S. natural gas futures climbed about 2% to a two-week high on Tuesday with a drop in daily output and as the amount of gas flowing to the country’s liquefied natural gas (LNG) export plants increases after Freeport LNG’s facility in Texas returned to near full service over the past few days.
That price increase came despite forecasts for milder weather and lower gas demand over the next two weeks than previously expected.
Front-month gas futures for October delivery on the New York Mercantile Exchange rose 6.4 cents, or 2.4%, to $2.792 per million British thermal units (mmBtu) at 8:48 a.m. EDT (1248 GMT), putting the contract on track for its highest close since Aug. 30.
Looking ahead, the premium on March 2024 futures over April 2024, which the industry calls the widow maker, slid to around 24 cents per mmBtu, its lowest since March 2020.
The industry calls the March-April spread the “widow maker” because rapid price moves resulting from changing weather forecasts have forced some speculators out of business, including the Amaranth hedge fund, which lost more than $6 billion in 2006.
The industry uses the March-April spread to bet on winter weather forecasts since March is the last month of the winter heating season when utilities pull gas out of storage.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the lower 48 U.S. states eased to 102.2 billion cubic feet per day (bcfd) so far in September, down from a record 102.3 bcfd in August.
On a daily basis, however, output was on track to drop by 3.1 bcfd to a preliminary five-month low of 99.6 bcfd on Tuesday. That would be the biggest one-day drop since December 2022. Analysts, however, said preliminary data is often revised later in the day.
Meteorologists forecast the weather in the lower 48 states would remain near normal until around Sept. 24 before turning mostly warmer than usual from Sept. 25-Oct. 3. Traders, however, noted that above normal temperatures in late September were still mild with averages expected to be around 73 degrees Fahrenheit (22.8 Celsius) versus a normal of 70 F for that time of year.
LSEG forecast U.S. gas demand, including exports, will edge up to 95.8 bcfd next week from 95.3 bcfd this week. Those forecasts were lower than LSEG’s outlook on Monday.
Gas flows to the seven big U.S. LNG export plants averaged 12.8 bcfd so far in September, up from 12.3 bcfd in August. That compares with a monthly record of 14.0 bcfd in April.
The 2.1-bcfd Freeport plant was on track to pull in about 2.0 bcfd of gas for a fourth day in a row on Tuesday, up from an average of 0.3 bcfd from Sept. 10-13, according to LSEG data.
Looking ahead, traders noted Berkshire Hathaway Energy’s 0.8-bcfd Cove Point LNG export plant in Maryland was on track to shut for about a week of planned maintenance around Sept. 21-29, according to company notices to customers. Cove Point shuts every year in the autumn for maintenance. In 2022, it shut from around Oct. 1-27, according to LSEG data.
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 to supply disruptions and sanctions linked to Russia’s war in Ukraine.
Gas was trading around $11 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe and $14 at the Japan Korea Marker (JKM) in Asia.
(Reporting by Scott DiSavino; editing by David Evans)