U.S. natural gas futures climbed about 2% to a 12-week high on Monday as oil and gas producers continued to reduce output after months of relatively low prices.

Front-month gas futures NGc1 for October delivery on the New York Mercantile Exchange were up 5.9 cents, or 2.4%, to $2.493 per million British thermal units (mmBtu) at 9:18 a.m. EDT (1318 GMT), putting the contract on track for its highest close since June 28.

That price increase pushed the front-month into technically overbought territory for the first time since the middle of June.

With gas futures up about 20% over the past four weeks, speculators boosted their net long futures and options positions on the New York Mercantile and Intercontinental Exchanges for a third week in a row to their highest since early July, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.

Despite recent price gains, analysts forecast gas at the U.S. Henry Hub benchmark in Louisiana NG-W-HH-SNL would only average around $2.41 per mmBtu in 2024, a four-year low.

Analysts said those low prices were the biggest reason producers were on track to cut output this year for the first time since 2020, when the COVID-19 pandemic cut demand for the fuel.

In the Atlantic basin, the U.S. National Hurricane Center (NHC) forecast a disturbance in the Caribbean Sea had an 80% chance of strengthening into a tropical cyclone as it moves into the eastern Gulf of Mexico over the next week or so.

Analysts have said that hurricanes and other storms were more likely to reduce gas prices by cutting demand through power outages and knocking liquefied natural gas (LNG) export plants out of service.

That’s because over 75% of U.S. gas production comes from big inland shale basins like Appalachia in Pennsylvania, West Virginia and Ohio and the Permian in West Texas and eastern New Mexico.

That is very different from 20 years ago when roughly 20% of the nation’s gas came from wells in the federal offshore part of the Gulf of Mexico. Back then Gulf Coast hurricanes usually caused gas prices to spike higher. But now, the offshore region produces only about 2% of the country’s gas.

In Canada, meanwhile, next-day gas prices at the AECO hub NG-ASH-ALB-SNL in Alberta fell to 5 cents per mmBtu, their lowest level since hitting a record low of around 2 cents in August 2022, according to data from financial firm LSEG going back to 1993.

SUPPLY AND DEMAND

LSEG said gas output in the Lower 48 U.S. states has slid to an average of 102.1 billion cubic feet per day (bcfd) so far in September, down from 103.2 bcfd in August.

With milder autumn weather coming, LSEG forecast average gas demand in the Lower 48, including exports, will slide from 99.1 bcfd this week to 97.7 bcfd next week. Those forecasts were lower than LSEG’s outlook on Friday.

Gas flows to the seven big U.S. LNG export plants have eased to an average of 12.8 bcfd so far in September, down from 12.9 bcfd in August. That compares with a monthly record high of 14.7 bcfd in December 2023.

That reduction was due mostly to the planned shutdown of Berkshire Hathaway Energy’s 0.8-bcfd Cove Point LNG export plant in Maryland on Sept. 20 for around three weeks of annual maintenance.
Source: Reuters (Reporting by Scott DiSavino; Editing by Paul Simao)