U.S. natural gas futures climbed about 2% to a three-week high as hot weather forces power generators to burn lots of gas to keep air conditioners humming and a slow but steady rise in gas flows to liquefied natural gas (LNG) export plants.
That price increase came despite ample amounts of gas in storage and record output. That record output should allow energy firms to keep injecting more gas into storage than usual in coming weeks. Stockpiles were currently around 6% above the five-year normal.
Front-month gas futures for August delivery on the New York Mercantile Exchange rose 6.4 cents, or 1.8%, to $3.606 per million British thermal units at 8:57 a.m. EDT (1257 GMT), putting the contract on track for its highest close since June 27.
For the week, the front-month was up about 9% after dropping about 14% over the prior four weeks.
Meteorologists forecast the weather in the Lower 48 U.S. states would remain mostly hotter than normal through at least August 2, with the hottest days so far this summer expected next week.
Temperatures across the country will average around 81 degrees Fahrenheit (27.2 degrees Celsius) on July 25, on track to top this summer’s current hottest daily average of 80 F on June 24 but still below the daily average record high of 83 F on July 20, 2022, according to data from financial firm LSEG going back to 2018.
SUPPLY AND DEMAND
LSEG said average gas output in the Lower 48 rose to 107.1 billion cubic feet per day so far in July, up from a monthly record high of 106.4 bcfd in June.
On a daily basis, output hit a record high of 107.92 bcfd on July 14, topping the prior all-time daily high of 107.91 bcfd on April 18.
LSEG forecast average gas demand in the Lower 48, including exports, would slide from 110.1 bcfd this week to 107.4 bcfd next week before rising to 110.9 bcfd in two weeks. The forecasts for this week and next were similar to LSEG’s outlook on Thursday.
The average amount of gas flowing to the eight big U.S. LNG export plants rose to 15.8 bcfd so far in July as liquefaction units at some plants slowly exited maintenance reductions and unexpected outages. That was up from 14.3 bcfd in June and 15.0 bcfd in May, but remained below the monthly record high of 16.0 bcfd in April.
U.S. energy firm Kinder Morgan’s Elba Island LNG export plant in Georgia was on track to take in a small amount of gas on Friday, a sign it was starting to exit a two-day maintenance outage, data from LSEG showed.
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 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