U.S. natural gas futures edged up about 1% to a fresh eight-month high on rising exports and forecasts for cooler weather and higher heating demand next week than previously expected.

Gas futures were also supported by worries about global energy supplies that boosted oil and gas prices around the world due to tensions in the Middle East and possible strikes by workers at liquefied natural gas (LNG) export plants in Australia.

Oil prices CLc1, surged about 3% as military clashes between Israel and the Palestinian Islamist group Hamas ignited fears of a wider conflict in the Middle East.

In Australia, Chevron sought government help to resolve issues blocking a deal with unions at its two LNG facilities in Western Australia after workers announced plans to resume strikes.

Australia was the world’s biggest LNG exporter in 2022, according to data from LSEG. If strikes reduce Australia’s LNG exports, global gas prices will rise, including in the U.S. The U.S. is on track to become the world’s biggest LNG exporter in 2023.

Front-month gas futures NGc1 for November delivery on the New York Mercantile Exchange rose 1.7 cents, or 0.5%, to $3.355 per million British thermal units by 9:27 a.m. EDT (1327 GMT), putting the contract on track for its highest close since Jan. 23 for a second day in a row.

That also put the front-month up for a fifth day in a row and kept it in technically overbought territory, with a relative strength index (RSI) above 70, for a third consecutive day for the first time since June.

With the contract up about 14% last week, speculators switched their futures and options position on the New York Mercantile and Intercontinental Exchanges from net short to net long, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.

Even through temperatures were expected to decline with the coming of winter, meteorologists forecast the weather would remain milder than normal through late October, keeping both heating and cooling demand low.

Traders said that mild outlook helped cut the premium of futures for November over October, which the market uses to bet on winter forecasts, to its lowest since September 2022.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the lower 48 U.S. states rose to 102.7 billion cubic feet per day (bcfd) so far in October, up from 102.6 bcfd in September but still below the monthly record of 103.1 bcfd in July.

With seasonally cooler weather coming, LSEG forecast U.S. gas demand, including exports, would rise from 95.2 bcfd this week to 97.0 bcfd next week. The forecast for next week was higher than LSEG’s outlook on Friday.

Pipeline exports to Mexico so far in October held near the monthly record high of 7.2 bcfd hit in September.

Gas flows to the seven big U.S. LNG export plants rose to 13.0 bcfd so far in October, up from 12.6 bcfd in September, but still well below the record high of 14.0 bcfd in April.

Energy traders said they expected total LNG feedgas to rise to near record levels over the next week or so once Berkshire Hathaway Energy’s 0.8-bcfd Cove Point facility in Maryland exits a maintenance outage.

Cove Point shut around Sept. 20. Analysts at LSEG have said the plant usually shuts for about three weeks of maintenance each autumn.
Source: Reuters (Reporting by Scott DiSavino; Editing by Kirsten Donovan)