U.S. natural gas futures rose more than 2% on Thursday aided by forecasts for higher demand next week and as the market awaits a federal weekly storage report that is expected to show a smaller-than-normal injection last week.
Front-month gas futures NGc1 for November delivery on the New York Mercantile Exchange were up 8.2 cents, or 2.8%, to $2.97 per million British thermal units (mmBtu) at 9:44 a.m. EDT (1344 GMT), having hit the highest level since mid-June at $3 on Tuesday.
This morning is seeing another move higher as both heat in the western U.S. and cold coming to the northeast provide support, said Gary Cunningham, director of market research at Tradition Energy.
Financial firm LSEG estimated 141 total degree days (TDDs) over the next two weeks, higher than the 136 estimated on Wednesday. Average gas demand in the Lower 48, including exports, will also rise from 95.3 billion cubic feet (bcfd) this week to 95.7 bcfd next week, LSEG forecast.
One factor that has supported prices in recent weeks – the front-month has gained about 50% since late August- was a drop in the amount of fuel going into storage for the 2024-2025 winter heating season.
Storage injections in July, August and likely in September were at record lows, according to federal energy data going back to 1997.
That’s because many producers reduced their drilling activities this year after average spot monthly prices at the U.S. Henry Hub NG-W-HH-SNL benchmark in Louisiana fell to a 32-year low in March. They have remained relatively low since that time.
The U.S. Energy Information Administration will release its weekly storage report at 10:30 a.m. EDT (1430 GMT).
Analysts forecast U.S. utilities added a smaller-than-usual 57 bcf of natural gas into storage in the week ended Sept. 27. That compares with an with an injection of 87 bcf during the same week a year ago and a five-year (2019-2023) average increase of 98 bcf for this time of year.
Even though storage injections have been lower than usual in 19 of the past 20 weeks, the amount of gas in inventory was still about 6% above normal levels for this time of year due to low heating demand during the mild winter of 2023-2024.
One factor that has weighed on gas prices in recent days was the reduction in the amount that gas power generators need to burn, with about a million homes and businesses still without power in the U.S. Southeast and Midwest after Hurricane Helene battered the region late last week.
“The demand destruction caused by the catastrophic path of Helene will continue to overhang the market for a few weeks,” Cunningham added.
Financial firm LSEG said gas output in the Lower 48 U.S. states has fallen to an average of 101.0 billion cubic feet per day (bcfd) so far in October, down from 101.8 bcfd in September. That compares with a record 105.5 bcfd in December 2023.
Meanwhile, Dutch and British wholesale gas prices eased on Thursday morning but remain near their highest in a month as concerns persist over disruption to gas production in the Middle East as conflict in the region intensifies.
Global gas demand is forecast to rise by more than 2.5% in 2024, with similar growth expected in 2025, largely supported by Asia, which alone is expected to account for over half of incremental gas demand, the International Energy Agency (IEA) said in a report.
Source: Reuters (Reporting by Anushree Mukherjee and Swati Verma in Bengaluru; Editing by Sharon Singleton)