U.S. natural gas futures climbed about 3% on Monday on lower output so far this month and forecasts for cooler weather and more heating demand next week than previously expected.

That price increase came even though meteorologists forecast the weather would remain mostly warmer than normal through early November, keeping heating demand lower than usual for this time of year.

Front-month gas futures NGc1 for November delivery on the New York Mercantile Exchange rose 6.9 cents, or 3.1%, to $2.327 per million British thermal units (mmBtu) at 8:23 a.m. EDT (1223 GMT).

That price gain pushed the front-month out of technically oversold territory for the first time in four days. On Friday, the contract closed at its lowest since Sept. 10.

With gas futures down 22% over the past three weeks, however, speculators last week cut their net long futures and options positions on the New York Mercantile and Intercontinental Exchanges for a second week in a row to their lowest since April, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.

SUPPLY AND DEMAND

Financial group LSEG said average gas output in the Lower 48 U.S. states slipped to 101.5 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.

Analysts projected energy firms would cut output in calendar 2024 for the first time since 2020 when the COVID-19 pandemic cut demand for the fuel.

That’s because many producers reduced their drilling activities earlier 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. Prices have remained relatively low since then.

Meteorologists projected the weather in the Lower 48 states will remain mostly warmer than normal through Nov. 5. Despite those mild forecasts, it will still be cooler with more heating demand in early November than this week.

The average temperature in the Lower 48 states will drop to around 56 degrees Fahrenheit (13.3 Celsius) by Nov. 5, according to the latest forecasts, down from an average of 63 F now. That, however, is well above the normal average of 51 F in early November.

With cooler weather coming, LSEG forecast average gas demand in the Lower 48, including exports, would rise from 96.0 bcfd this week to 100.2 bcfd next week. The forecast for this week was lower than LSEG’s outlook on Friday, while its forecast for next week was higher.

The amount of gas flowing to the seven big U.S. LNG export plants rose to an average of 13.1 bcfd so far in October, up from 12.7 bcfd in September. That compares with a monthly record high of 14.7 bcfd in December 2023.

The U.S. became the world’s biggest LNG supplier in 2023, ahead of recent leaders Australia and Qatar, as much higher global prices feed demand for more exports due in part to supply disruptions and sanctions linked to Russia’s invasion of Ukraine in February 2022.

Gas prices were trading around $13 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe TRNLTTFMc1 and the Japan Korea Marker (JKM) benchmark in Asia.
Source: Reuters (Reporting by Scott DiSavino)