U.S. natural gas futures jumped about 6% to a three-week high on Thursday on a smaller-than-expected weekly U.S. storage build, soaring gas prices in Europe, a decline in U.S. output and expectations of record power demand in Texas next week.
That price increase came despite a drop in the amount of gas flowing to U.S. liquefied natural gas (LNG) export facilities due to plant maintenance.
The U.S. Energy Information Administration (EIA) said utilities added just 84 billion cubic feet (bcf) of gas into storage during the week ended June 9.
That was less than the 95-bcf build analysts forecast in a Reuters poll and compared with an increase of 94 bcf in the same week last year and a five-year (2018-2022) average increase of 84 bcf.
Last week’s increase boosted stockpiles to 2.634 trillion cubic feet (tcf), or 15.5% above the five-year average of 2.281 tcf for the time of year.
Analysts expected the build to be higher because mild weather last week kept air conditioning demand low. Traders, however, said low wind power last week forced generators to burn more gas to produce power despite the mild weather.
The amount of total U.S. power generation from wind fell to just 5% last week, down from a recent high of 10% during the week ended June 2, according to federal energy data. That boosted the amount of generation from gas to 45% last week, up from recent lows of 40% during the weeks ended May 26 and June 2.
In Texas, meanwhile, the state’s power grid operator, the Electric Reliability Council of Texas (ERCOT), now expects electricity use will break peak demand records next week as homes and businesses crank up air conditioners to escape the summer’s first heat wave.
Earlier in the week, ERCOT forecast demand would break the record this week.
Front-month gas futures for July delivery on the New York Mercantile Exchange rose 14.9 cents, or 6.4%, to $2.491 per million British thermal units (mmBtu) at 10:43 a.m. EDT (1443 GMT), putting the contract on track for its highest close since May 19.
That also puts the front-month on track to rise for a fourth day in a row and the ninth time in the last 10 days.
Global prices have moved in different directions this month, with gas at the Dutch Title Transfer Facility (TTF) benchmark in Europe soaring to around $13 per mmBtu, which is up about 84% since TTF fell to a 25-month low of $7.34 on June 2.
In Asia, meanwhile, gas prices at the Japan Korea Marker (JKM) in Asia JKMc1 have held near a 24-month low of $9 per mmBtu since late May.
SUPPLY AND DEMAND
Data provider Refinitiv said average gas output in the U.S. Lower 48 states slid to 101.9 billion cubic feet per day (bcfd) so far in June, down from a monthly record of 102.5 bcfd in May.
Meteorologists forecast the weather would remain mostly near normal from June 15-22 before turning hotter-than-normal from June 23-30.
With warmer weather coming, Refinitiv forecast U.S. gas demand, including exports, would rise from 93.1 bcfd this week to 96.1 bcfd next week. Those forecasts were similar to Refinitiv’s outlook on Wednesday.
Gas flows to the seven big U.S. LNG export plants fell to an average of 11.6 bcfd so far in June, down from 13.0 bcfd in May. That is well below the monthly record of 14.0 bcfd in April due to maintenance at several facilities, including Cheniere Energy Inc’s LNG.A Sabine Pass in Louisiana.
On a daily basis, the amount of gas flowing to LNG plants dropped to 10.2 bcfd on Wednesday, the lowest since December 2022.
Source: Reuters (Reporting by Scott DiSavino; editing by Barbara Lewis and Sharon Singleton)