U.S. natural gas futures climbed about 2% on Friday ahead of the long U.S. Memorial Day holiday weekend on a drop in output so far this month and forecasts for hotter-than-normal weather this summer that should boost the amount of gas power generators burn to keep air conditioners humming.
Gas futures for June delivery on the New York Mercantile Exchange rose 7.4 cents, or 2.3%, to settle at $3.327 per million British thermal units.
For the week, the contract was down less than 1% after losing around 12% last week.
Looking forward, the premium of futures for July over June (NGM25-N25) rose to a record 39 cents per mmBtu with several forecasts projecting hotter-than-normal weather in July and August.
Some analysts projected energy firms added a near-normal amount of gas into storage during the week ended May 23 after they injected more gas than usual for five weeks in a row as mild weather kept both heating and cooling demand low.
Gas stockpiles were currently around 4% above the five-year (2020-2024) average.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states fell to 104.9 billion cubic feet per day in May, down from a monthly record high of 105.8 bcfd in April.
Energy traders said output reductions so far this month were due in part to maintenance on gas pipes, including U.S. energy firm Kinder Morgan’s 2.7-bcfd Permian Highway from the Permian Basin in West Texas to the Texas Gulf Coast.
Kinder Morgan said it is performing a turbine exchange at the Big Lake compressor station from May 13-26 that will reduce mainline capacity to around 2.2 bcfd.
Meteorologists projected the weather across the Lower 48 states would remain mostly warmer than normal through June 7.
LSEG forecast average gas demand in the Lower 48, including exports, will drop from 99.5 bcfd this week to 96.1 bcfd next week before rising to 97.4 bcfd in two weeks. The forecast for this week was lower than LSEG’s outlook on Thursday.
The average amount of gas flowing to the eight big LNG export plants operating in the U.S. fell to 15.1 bcfd in May, down from a monthly record of 16.0 bcfd in April.
The LNG feedgas decline this month was mostly due to maintenance reductions at Cameron LNG’s 2.0-bcfd plant in Louisiana, Cheniere Energy’s
LNG
3.9-bcfd Corpus Christi plant under construction and in operation in Texas, and Cheniere’s 4.5-bcfd Sabine Pass in Louisiana, and brief unplanned reductions at Freeport LNG’s 2.1-bcfd plant in Texas.
Looking ahead, energy traders said they expect LNG feedgas to remain below April’s record high in June with Cheniere planning to conduct about three weeks of maintenance on a couple of liquefaction trains at Sabine from around June 2-23.
The U.S. became the world’s biggest LNG supplier in 2023, surpassing Australia and Qatar, as surging global prices fed demand for more exports, due in part to supply disruptions and sanctions linked to Russia’s 2022 invasion of Ukraine.
Gas was trading at around $12 per mmBtu at both the Dutch Title Transfer Facility (TRNLTTFMc1) benchmark in Europe and the Japan Korea Marker (JKMc1) benchmark in Asia.
Source: Reuters