U.S. natural gas futures rose about 2% to a two-week high on Thursday on forecasts for higher demand next week, despite a much bigger than expected weekly storage build.
The U.S. Energy Information Administration (EIA) said utilities added a seasonal record 129 billion cubic feet (bcf) of gas to storage during the week ended Sept. 30.
That was the biggest weekly build during the autumn and the third biggest on record after increases of 147 bcf in July 2003 and 132 bcf in May 2015, according to EIA data going back to 1993.
It was also much higher than the 113-bcf build analysts forecast in a Reuters poll and compared with an increase of 114 bcf during the same week last year and a five-year (2017-2021) average increase of 87 bcf. EIA/GASNGAS/POLL
Analysts said last week’s build was bigger than usual due to mild weather and an increase in wind power that reduced the amount of gas power generators needed to burn to produce electricity.
Wind power produced about 9% of the nation’s electricity last week, up from as little as 6% a few weeks earlier, according to federal energy data.
Gas prices also increased despite record monthly output and recent cuts in gas demand from massive power outages and reduced liquefied natural gas (LNG) exports.
Over 202,000 homes and businesses were still without power in Florida after Hurricane Ian hit the state on Sept. 28-29, reducing the amount of gas that power generators need to burn. Ian knocked out power to over 4 million in Florida and 1.1 million in North and South Carolina.
Gas demand was also reduced by outages at LNG export plants, including Berkshire Hathaway Energy’s 0.8-billion cubic feet per day (bcfd) Cove Point in Maryland for about three weeks of planned work starting Oct. 1 and Freeport LNG’s 2.0-bcfd plant in Texas for unplanned work after an explosion on June 8. Freeport LNG expects the facility to return to at least partial service in early to mid-November.
Front-month gas futures NGc1 rose 14.1 cents, or 2.0%, to $7.071 per million British thermal units (mmBtu) at 10:43 a.m. EDT (1443 GMT), putting the contract on track for its highest close since Sept. 22 for a second day in a row.
U.S. futures were up about 90% so far this year as soaring global gas prices have fed demand for U.S. exports due to supply disruptions and sanctions linked to Russia’s Feb. 24 invasion of Ukraine.
Gas was trading around $49 per mmBtu in Europe TRNLTTFMc1 and $35 in Asia JKMc1. NG/EU
Russian gas exports via the three main lines into Germany – Nord Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route – have averaged just 1.3 bcfd so far in October, the same as September but well below 9.2 bcfd seen in October 2021.
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U.S. gas futures lag far behind global prices because the United States is the world’s top producer with all the fuel it needs for domestic use, while capacity constraints and the Freeport outage prevent the country from exporting more LNG.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 100.1 bcfd so far in October from a monthly record of 99.4 bcfd in September.
With cooler weather coming, Refinitiv projected average U.S. gas demand, including exports, would rise from 90.2 bcfd this week to 91.5 bcfd next week. The forecast for next week was higher than Refinitiv’s outlook on Wednesday.
The average amount of gas flowing to U.S. LNG export plants fell to 10.8 bcfd so far in October from 11.5 bcfd in September. That compares with a monthly record of 12.9 bcfd in March. The seven big U.S. export plants can turn about 13.8 bcfd of gas into LNG.
Source: Reuters (Reporting by Scott DiSavino; Editing by Kirsten Donovan and Nick Zieminski)