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US natgas prices jump 5% to 21-week high on hotter weather forecasts

Tuesday, 11 June 2024 | 00:00

U.S. natural gas futures jumped about 5% to a fresh 21-week high on Monday as forecasts for hotter weather than previously expected will prompt power generators to burn more gas to keep air conditioners humming this week.

Traders said that price increase would have been much higher if not for low spot prices, small increases in output in recent weeks and the tremendous oversupply of gas still in storage.

Analysts said current gas stockpiles were still around 24% above normal levels for this time of year.

Front-month gas futures NGc1 for July delivery on the New York Mercantile Exchange were up 15.2 cents, or 5.2%, to $3.070 per million British thermal units (mmBtu) at 8:51 a.m. EDT (1251 GMT), putting the contract on track for its highest close since Jan. 12 for a second day in a row.

That pushed the contract into technically overbought territory for the first time since late May.

Even though gas prices gained 13% last week, speculators cut their net long futures and options positions on the New York Mercantile and Intercontinental Exchanges for the first time in five weeks, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.

One factor that has helped keep a lid on futures price spikes so far this year has been lower spot or next-day prices at the U.S. Henry Hub benchmark in Louisiana.

Even though next-day prices at the Henry Hub were up about 7% to $2.46 per mmBtu for Monday, the spot market has traded below front-month futures for 94 out of 110 trading days so far this year, according to data from financial firm LSEG.

In other spot news, next-day gas at the AECO hub in Alberta, Canada fell to 61 cents per mmBtu for Monday, its lowest price since October 2022.

SUPPLY AND DEMAND

LSEG said gas output in the Lower 48 U.S. states has slipped to an average of 98.0 billion cubic feet per day (bcfd) so far in June, down from 98.1 bcfd in May. That compares with a monthly record of 105.5 bcfd in December 2023.

On a daily basis, output was on track to slide by around 0.5 bcfd to a preliminary three-week low of 97.2 bcfd on Monday, down from 97.7 bcfd on Sunday. That output, however, was up about 0.6 bcfd from a 15-week low of 96.5 bcfd on May 1.

Analysts said the increase since May 1 was a sign producers were slowly boosting output following the 47% jump in futures prices in April and May. Output hit a six-week high of 99.5 bcfd on May 24.

Overall, U.S. gas production is still down around 8% so far in 2024 after several energy firms, including EQT and Chesapeake Energy CHK.O, delayed well completions and cut drilling activities when prices fell in February and March.

Meteorologists projected weather across the Lower 48 states would remain mostly warmer than normal through June 25 except for some near-normal days from June 10-12.

LSEG forecast gas demand in the Lower 48, including exports, would jump from 95.1 bcfd this week to 99.2 bcfd next week. The forecast for this week was higher than LSEG’s outlook on Friday.

Gas flows to the seven big U.S. LNG export plants have risen to 13.1 bcfd so far in June, up from 12.9 bcfd in May.

That, however, remains well below the monthly record high of 14.7 bcfd in December 2023 due to ongoing maintenance at several plants, including Cheniere Energy’s LNG.N Sabine Pass and Venture Global’s Calcasieu Pass in Louisiana.
Source: Reuters (Reporting by Scott DiSavino; Editing by Paul Simao)

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