U.S. natural gas futures jumped about 8% to a one-week high on Monday on forecasts for much colder weather and higher heating demand over the next two weeks than previously expected and on a decline in output so far this month and near-record flows of gas to liquefied natural gas (LNG) export plants.
Front-month gas futures for November delivery on the New York Mercantile Exchange rose 24 cents, or 8.0%, to $3.248 per million British thermal units (mmBtu), putting the contract on track for its highest close since October 9.
In the tropics, the U.S. National Hurricane Center projected a tropical wave in the Caribbean Sea had a 70% chance of strengthening into a tropical cyclone as it moves west toward Central America over the next week. The system is not expected to reach the U.S. mainland during that time.
Even though storms can boost U.S. gas prices by cutting output along the U.S. Gulf Coast, they are more likely to reduce prices by shutting LNG export plants and knocking out power to homes and businesses. About 40% of the power generated in the U.S. comes from gas-fired plants.
SUPPLY AND DEMAND
LSEG said average gas output in the Lower 48 states fell to 106.6 billion cubic feet per day so far in October, down from 107.4 bcfd in September and a record monthly high of 108.0 bcfd in August.
Record output earlier this year allowed energy companies to inject more gas into storage than usual. There is currently about 4% more gas in storage than normal for this time of year.
Over the weekend, meteorologists changed their two-week weather forecast to mostly near-normal through November 4 from mostly above-normal through November 1.
With the weather turning colder, LSEG projected average gas demand in the Lower 48 states, including exports, would rise from 101.5 bcfd this week to 105.5 bcfd next week. Those forecasts were higher than LSEG’s outlook on Friday.
The average amount of gas flowing to the eight big U.S. LNG export plants rose to 16.4 bcfd so far in October, up from 15.7 bcfd in September and a monthly record high of 16.0 bcfd in April.
The U.S. became the world’s biggest LNG producer in 2023, surpassing Australia and Qatar, as surging global prices fed demand for more exports, due in part to supply disruptions and sanctions linked to Russia’s 2022 invasion of Ukraine.
Gas was trading around $11 per mmBtu at both the Dutch Title Transfer Facility benchmark in Europe and the Japan Korea Marker benchmark in Asia.
(Reporting by Scott DiSavino in New York; Editing by Andrea Ricci)