U.S. natural gas futures edged up 1% on Friday on forecasts for warmer weather and higher gas demand in mid- to late September.
In the West, a tropical storm approaching Southern California threatened to bring high winds that could whip up wildfires and heavy rainfall that could trigger flash floods, but the system will likely bring relief from a brutal, 10-day heat wave.
The increase in gas futures came despite the ongoing outage at the Freeport liquefied natural gas (LNG) export plant in Texas, which has left more gas in the United States for utilities to inject into stockpiles for next winter.
Freeport, the second-biggest U.S. LNG export plant, was consuming about 2 billion cubic feet per day (bcfd) of gas before it shut 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 8.1 cents, or 1.0%, to settle at $7.996 per million British thermal units (mmBtu).
That put the contract down about 9% for the week after sliding about 5% last week. It was the contract’s biggest weekly loss since late June and the first time it fell for three weeks in a row since early July.
So far this year, gas futures were up about 115% as higher prices in Europe and Asia keep demand for U.S. LNG exports strong. Global gas prices have soared due to supply disruptions and sanctions linked to Russia’s Feb. 24 invasion of Ukraine.
Gas was trading around $60 per mmBtu in Europe TRNLTTFMc1 and $54 in Asia JKMc1.
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 – averaged just 1.4 bcfd so far in September, down from 2.5 bcfd in August and 10.8 bcfd in September 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 prevents the country from exporting more LNG.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 99.1 bcfd so far in September from a record 98.0 bcfd in August.
Refinitiv projected average U.S. gas demand, including exports, would drop from 97.4 bcfd this week to 92.9 bcfd next week as the weather cools before rising to 93.3 bcfd in two weeks as the weather warms again. The forecast for next week was lower than Refinitiv’s outlook on Thursday.
The average amount of gas flowing to U.S. LNG export plants rose to 11.1 bcfd so far in September from 11.0 bcfd in August. 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.
The reduction in exports from Freeport is a problem for Europe, where most U.S. LNG has gone this year as countries there wean themselves off Russian energy.
Gas stockpiles in northwest Europe – Belgium, France, Germany and the Netherlands EUGAS/STORAGE – were currently about 4% above their five-year (2017-2021) average for this time of year, according to Refinitiv. Storage was currently around 84% of capacity.
That is much healthier than U.S. gas inventories, which were still about 12% below their five-year norm.
Source: Reuters (Reporting by Scott DiSavino Editing by Nick Zieminski and Jonathan Oatis)