U.S. natural gas futures edged up about 1% on Thursday on forecasts for cooler weather and more heating demand over the next two weeks than previously expected, and rising amounts of feed gas flowing to the nation’s liquefied natural gas (LNG) export plants.
That slight price increase also came ahead of a federal report expected to show that utilities pulled a near-normal amount of gas out of storage during mostly seasonally normal weather last week.
Analysts said utilities likely added 1 billion cubic feet (bcf) of gas to storage during the week ended Nov. 29. That compares with a decrease of 81 bcf during the same week last year and a five-year average draw of 47 bcf for this time of year.
Front-month gas futures NGc1 for January delivery on the New York Mercantile Exchange rose 3.5 cents, or 1.2%, to $3.078 per million British thermal units (mmBtu) at 7:49 a.m. EST (1249 GMT).
With the heavily-traded March-April “widow maker” spread in unusual contango for the first time this week, with the April contract priced higher than the March contract, some analysts have said that the likelihood of winter price spikes is over before the heating season officially starts.
March is the last month of the winter storage withdrawal season, and April is the first month of the summer storage injection season. Since gas is primarily a winter heating fuel, traders have said summer prices should not trade above winter.
It is possible that gas prices have already hit their peak for 2024 when they reached $3.56 per mmBtu in November. Over the past five years, prices hit their yearly highs in January 2023, August 2022, October 2021 and 2020, and January 2019.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states rose to 102.2 billion cubic feet per day (bcfd) so far in December, up from 101.5 bcfd in November. That compares with a record 105.3 bcfd in December 2023.
Analysts expect producers to boost gas output in 2025 as rising demand from LNG export plants increases prices after drillers cut production in 2024 for the first time since the COVID-19 pandemic reduced usage of the fuel.
Annual average gas prices at the U.S. Henry Hub NG-W-HH-SNL benchmark in Louisiana will soar by over 40% to $3.27 per mmBtu in 2025 after dropping to a four-year low of $2.29 in 2024, according to analysts forecasts.
Meteorologists projected the weather in the Lower 48 will turn from mostly colder than normal from now through Dec. 7 to mostly warmer than normal from Dec. 8-20.
With less cold coming, LSEG forecast average gas demand in the Lower 48, including exports, would drop from 137.0 bcfd this week to 129.4 bcfd next week.
The amount of gas flowing to the seven big operating U.S. LNG export plants rose to an average of 14.1 bcfd so far in December, up from 13.6 bcfd in November. That compares with a monthly record high of 14.7 bcfd in December 2023.
The U.S. became the world’s biggest LNG supplier in 2023, ahead of recent leaders Australia and Qatar, as much higher global prices feed demand for more exports due in part to supply disruptions and sanctions linked to Russia’s invasion of Ukraine in February 2022.
Gas prices traded near a one-year high of around $15 per mmBtu at the Dutch Title Transfer Facility benchmark in Europe TRNLTTFMc1 and near an 11-month high of $15 at the Japan-Korea Marker JKMc1 benchmark in Asia on worries about low supplies from Russia and the coming of colder winter weather in Europe.
Source: Reuters (Reporting by Scott DiSavino; Editing by Tasim Zahid)