U.S. natural gas futures edged up about 1% to a one-week high on Wednesday with the start of the new higher-priced January contract and forecasts for higher demand over the next two weeks than previously expected.
The price increase came despite forecasts for less cold weather through mid December and near record output that should reduce the amount of gas utilities need to pull from storage to meet rising heating demand.
Analysts forecast the amount of gas in U.S. storage was about 8% above normal on Nov. 24.
On its first day as the front month, gas futures for January delivery on the New York Mercantile Exchange rose 2.1 cents, or 0.7%, from their Tuesday close to $2.858 per million British thermal units (mmBtu) at 9:40 a.m. EST (1440 GMT).
That put the contract on track for its highest close since Nov. 22.
It was about 5% higher than where the December contract closed on Tuesday when it was still the front month, which was the lowest close since Sept. 26.
With production at record highs and ample amounts of gas in storage, the futures market has been sending signals that some traders have given up hope of seeing winter price spikes from November through March.
Many in the market think futures have already peaked this winter in November.
The premium of futures for January over February fell to its lowest since June 2021 for a second day in a row.
The premium of futures for 2025 (one year out) and 2029 (five years out) over 2024 both rose to record highs.
Analysts expect prices to rise in 2025 and later years as demand for gas grows, with several new U.S. liquefied natural gas (LNG) export plants entering service in the U.S., Canada and Mexico.
In the spot market meanwhile, extreme cold in the U.S. Northeast this week boosted next-day gas prices in New England by 15% to $10.22 per mmBtu for Wednesday, their highest since February for a second day in a row.
SUPPLY AND DEMAND
LSEG said average gas output in the Lower 48 U.S. states has risen to 107.7 billion cubic feet per day (bcfd) so far in November, up from a record 104.2 bcfd in October.
On a daily basis however output over the past two days was on track to drop by 2.8 bcfd to a preliminary three-week low of 106.5 bcfd on Wednesday after hitting a record 109.3 bcfd on Monday.
Traders have noted that preliminary data is often revised later in the day.
Meteorologists projected the weather would swing from colder than normal now to warmer than normal from Nov. 30-Dec. 14.
With less cold coming, LSEG forecast U.S. gas demand in the Lower 48 states, including exports, would drop from 128.3 bcfd this week to 119.2 bcfd next week. Those forecasts were higher than LSEG’s outlook on Tuesday.
Gas flows to the seven big U.S. LNG export plants have risen 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 $13 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 Jan Harvey)