U.S. natural gas futures gained about 4% to a six-week high on Friday, erasing earlier losses, on forecasts for cooler weather and higher heating demand next week than previously expected and record liquefied natural gas (LNG) exports.

The amount of gas flowing to U.S. LNG export plants was on track to hit a record high for a second month in a row in April after Freeport LNG’s export plant in Texas exited an eight-month outage in February.

Gas prices rose despite an increase in output to near record highs and even though the latest forecasts were for seasonally mild weather and lower heating demand in mid May.

Front-month gas futures NGc1 for June delivery on the New York Mercantile Exchange rose 9 cents, or 3.8%, to $2.445 per million British thermal units (mmBtu) at 8:47 a.m. EDT (1247 GMT), putting the contract on track for its highest close since March 16. Earlier in the morning, prices were down about 2%.

That is higher than the 13.8 bcfd of gas the seven can turn into LNG since the facilities use some of the fuel to power equipment used to produce LNG.

GLOBAL GAS PRICE COLLAPSE

Some analysts have begun to question whether the recent collapse of gas prices in Europe and Asia could force U.S. exporters to cancel LNG cargoes this summer after mostly mild weather over the winter left massive amounts of gas in storage. In 2020, at least 175 LNG shipments were canceled due to oversupply and weak demand.

Gas was trading near a 21-month low of around $13 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe and at a 22-month low of $12 at the Japan Korea Marker (JKM) in Asia JKMc1.

That puts TTF down about 47% and JKM down about 61% so far this year, which is similar to the 49% drop in futures at the U.S. Henry Hub benchmark in Louisiana.

For now, however, most analysts say energy security concerns following Russia’s invasion of Ukraine in February 2022 should keep global gas prices high enough to sustain record U.S. LNG exports in 2023.

Gas stockpiles in northwest Europe – Belgium, France, Germany and the Netherlands – were currently at about 59% of capacity, keeping the amount of gas in storage about 59% above its five-year (2018-2022) average for the time of year, according to Refinitiv.

That is much more gas in storage than in U.S. inventories, which are currently about 22% above their five-year norm again due to mostly mild weather last winter.

Refinitiv said average gas output in the U.S. Lower 48 states had risen to 100.4 bcfd so far in April, up from 99.7 bcfd in March and close to the monthly record of 100.5 bcfd in January.

With the weather slowly turning seasonally warmer, Refinitiv forecast U.S. gas demand, including exports, would slide from 99.0 bcfd this week to 95.6 bcfd next week and 91.0 bcfd in two weeks. The forecast for this week was lower than Refinitiv’s outlook on Thursday, while the forecast for next week was higher.
Source: Reuters (Reporting by Scott DiSavino; Editing by Kirsten Donovan and Nick Zieminski)