U.S. natural gas futures edged up about 1% to a one-week high on Friday on forecasts for hotter than normal weather through at least late September and as global gas prices jumped due to worries about a strike at U.S. energy firm Chevron’s CVX.N liquefied natural gas (LNG) export projects in Australia.
Front-month gas futures NGc1 for October delivery on the New York Mercantile Exchange rose 2.6 cents, or 1.0%, to settle at $2.605 per million British thermal units (mmBtu), their highest close since Sept. 1.
For the week, the U.S. contract was down about 6% after rising about 9% last week.
In Europe, gas futures jumped 13% to a one-week high around $11 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark TRNLTTFMc1 after workers at Chevron’s LNG projects in Australia went on strike on Friday after talks broke down. NG/EU
Australia, Qatar and the U.S. are the world’s three biggest LNG producers. Chevron’s Australia facilities account for over 5% of global supply.
In Texas, homes and businesses have cranked up air conditioners to escape a brutal heat wave this week. The Electric Reliability Council of Texas (ERCOT), the grid operator, passed another reliability test after urging consumers to conserve energy for a second straight day on Thursday.
Earlier this week, ERCOT warned rotating outages were possible. The grid operator managed to prevent power outages, but maintaining reliability by boosting supplies and reducing demand helped lift real-time prices to over $4,000 per megawatt hour (MWh) for more than an hour Thursday evening after hitting the grid’s $5,000 price cap for about an hour Wednesday night.
Next-day power prices at the ERCOT North hub, which includes Dallas, jumped to a two-week high of $611 per MWh for Friday from $537 for Thursday. That compares with an average of $101 so far this year, $78 in 2022 and a five-year (2018-2022) average of $66 per MWh.
The Texas scorcher continues. High temperatures in Houston, the state’s biggest city, will reach 105 degrees Fahrenheit (40.6 Celsius) on Friday, breaking the day’s record of 97 F set in 1999, according to AccuWeather. That compares with a normal high of 91 F for this time of year.
ERCOT expects power use to peak at 85,521megawatts on Friday, which would break the grid’s all-time high of 85,435 MW on Aug. 10.
Extreme heat requires utilities to burn more gas to keep air conditioners humming, especially in Texas. In 2022, about 49% of the state’s power came from gas-fired plants, federal energy data showed.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the lower 48 U.S. states eased to 102.1 billion cubic feet per day (bcfd) so far in September, from a record 102.3 bcfd in August.
On a daily basis, output was on track to drop about 3.0 bcfd over the past four days to a preliminary 12-week low of 100.1 bcfd on Friday. Energy traders noted preliminary data is often revised later in the day.
Meteorologists forecast hotter than normal temperatures through at least Sept. 23.
LSEG forecast U.S. gas demand, including exports, will hold near 101.1 bcfd this week and next before sliding to 96.9 bcfd in two weeks. The forecast for next week was higher than LSEG’s outlook on Thursday.
Gas flows to the seven big U.S. LNG export plants rose to an average of 13.1 bcfd so far in September from 12.3 bcfd in August. That compares with a monthly record of 14.0 bcfd in April.
Source: Reuters (Reporting by Scott DiSavino; editing by Philippa Fletcher and David Gregorio)