U.S. natural gas futures edged up about 1% on Friday on forecasts for more demand next week than previously expected and a continuing increase in the amount of gas flowing to liquefied natural gas (LNG) export plants.

Keeping the price increase in check wereadditional signs that somedrillers were starting to pull more gas out of the ground, forecasts for less demand this week than previously expected and ongoing worries about the tremendous oversupply of gas still in storage.

Analysts forecast gas stockpiles were about 25% above normal for this time of year.

Front-month gas futures NGc1 for July delivery on the New York Mercantile Exchange rose 1.5 cents, or 0.6%, to settle at $2.587 per million British thermal units (mmBtu).

For the week, the front-month was up about 3% after sliding about 4% last week.

For the month, the contract jumped 30% in May after rising 13% in April. That wasthe front-month’s biggestmonthly increase since July 2022 when it soared about 52%.

SUPPLY AND DEMAND

Gas output in the Lower 48 U.S. states fell to an average of 97.8 billion cubic feet per day (bcfd) so far in May, down from 98.2 bcfd in April, according to financial firm LSEG. That compares with a monthly record of 105.5 bcfd in December 2023.

But on a daily basis, output has gained about 1.4 bcfd since hitting a 15-week low of 96.3 bcfd on May 1. Energy traders said that increase was a sign that the 58% jump in futures prices over the past five weeks has prompted some drillers to start producing more gas.

Overall, however, U.S. gas production was still down around 8% so far in 2024 as several energy firms, including EQT EQT.N and Chesapeake Energy CHK.O, delayed well completions and cut other drilling activities after prices fell to 3-1/2-year lows in February and March.

EQT is the biggest U.S. gas producer and Chesapeake is on track to become the biggest producer after its merger with Southwestern Energy SWN.N.

Meteorologists projected weather across the Lower 48 states would remain mostly warmer than normal through June 15 except for some near normal days from May 31-June 1 and June 7-11.

LSEG forecast gas demand in the Lower 48, including exports, would rise from 93.2 bcfd this week to 95.5 bcfd over the next two weeks. The forecast for this week was lower than LSEG’s outlook on Thursday, while its forecast for next week was higher.

Gas flows to the seven big U.S. LNG export plants rose from an average of 11.9 bcfd in April to 12.9 bcfd so far in May with the return of Freeport LNG’s 2.1-bcfd plant in Texas. That compares with a monthly record high of 14.7 bcfd in December 2023.

On a daily basis, LNG feedgas was on track to rise from 13.5 bcfd on Thursday to a preliminary 12-week high of 13.8 bcfd on Friday due to an increase at Freeport from 1.7 bcfd on Thursday to 2.1 bcfd on Friday.

U.S. exports to Mexico rose to an average of 7.2 bcfd so far in May, up from 6.5 bcfd in April and the current monthly record of 7.0 bcfd in August 2023.

Analysts said exports to Mexico climbed as Mexican generators burned more gas to produce electricity to meet record power demand earlier this week and as U.S. energy firm New Fortress Energy NFE.O prepares to start producing LNG at its Altamira export plant.
Source: Reuters (Reporting by Scott DiSavino, Editing by Nick Zieminski and Deepa Babington)