US Natural Gas Jumps Nearly 10% on Colder Forecasts
(Reuters) — U.S. natural gas futures jumped almost 10% to a near two-week high on Wednesday on forecasts for much colder weather and higher heating demand through early March than previously expected.
Traders noted that prices rose despite the slow return of U.S. production from cold weather-related reductions over the past month, and a 6% drop in European gas futures due to what looks like an easing of Russia-Ukraine tensions.
Over the past month or so, the United States has worked with other nations to ensure that gas supplies, mostly from LNG, would keep flowing to Europe in case Russia cuts off exports to the rest of the continent.
The United States and Europe have said they would sanction Russia if it invaded Ukraine, likely prompting Russia to cut some gas exports to Europe. Russia provides around 30%-40% of Europe's gas supplies, totaling about 16.3 Bcf/d in 2021.
Since the start of the year, however, the U.S. gas market has focused more on changes in U.S. weather, domestic supply and demand than world events. So far in 2022, U.S. gas followed European prices only about a third of the time versus two-thirds in the fourth quarter.
After weeks of near record volatility, U.S. front-month gas futures <NGc1> for March delivery rose 41.1 cents, or 9.5%, to settle at $4.717 per million British thermal units (mmBtu), their highest close since Feb. 3.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states fell from a record 97.3 Bcf/d in December to 94.0 Bcf/d in January and 92.7 Bcf/d so far in February, as cold weather froze oil and gas wells in several producing regions.
But on a daily basis, gas production has gained almost every day since dropping to 86.3 Bcf/d during a Feb. 4 winter storm, reaching a high of 95.2 Bcf/d on Feb. 11, the most since Jan. 1. Output on Wednesday, however, was on track to slip for a second day in a row to a preliminary one-week low of 94.3 Bcf/d.
Even though meteorologists forecast colder weather than previously expected, they still predicted higher temperatures next week than this week.
Refinitiv projected average U.S. gas demand, including exports, would slide from 122.9 Bcf/d this week to 121.2 Bcf/d next week. Next week's forecast was higher than Refinitiv's outlook on Tuesday.
Gas flowing to U.S. LNG export plants rose to an average of 12.7 Bcf/d so far in February, which would top January's monthly record of 12.4 Bcf/d, as liquefaction trains at Venture Global LNG's Calcasieu Pass export plant in Louisiana enter service.
A tanker arrived at Calcasieu on Feb. 7 and will likely leave with the plant's first cargo this week.
Traders said demand for U.S. LNG would remain strong so long as global gas prices keep trading well above U.S. futures as utilities around the world scramble for cargoes to meet surging demand in Asia and replenish low inventories in Europe, especially with the threat that Russia could invade Ukraine and cut gas supplies to Europe.
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