HomeNewsU.S. Natural Gas Prices Surge 5% on Surprise Storage Draw, Colder Forecasts

U.S. Natural Gas Prices Surge 5% on Surprise Storage Draw, Colder Forecasts

11/22/2024

(Reuters) — U.S. natural gas futures jumped about 5% on Thursday to a one-year high on a surprise weekly withdrawal from storage, forecasts for colder weather and rising gas flows to liquefied natural gas (LNG) export plants.

Capping those price gains, however, was news that a liquefaction train at Freeport LNG's export plant in Texas tripped offline on Wednesday.

The U.S. Energy Information Administration said utilities pulled 3 billion cubic feet (Bcf) of gas from storage during the week ended Nov. 15.

That compares with the 6-Bcf build analysts forecast in a Reuters poll, a 12-bcf increase seen during the same week last year and a five-year average draw of 16 Bcf for this time of year.

Front-month gas futures for December delivery on the New York Mercantile Exchange rose 14.6 cents, or 4.6%, to settle at $3.339 per million British thermal units (MMBtu), their highest close since November 2023.

That kept the front-month in technically overbought territory for a second day in a row and put it up for a fifth straight day. During those five days, the contract has gained about 20%.

Supply and Demand

Financial firm LSEG said average gas output in the Lower 48 U.S. states has eased to 100.8 billion cubic feet per day (Bcf/d) so far in November, down from 101.3 Bcf/d in October. That compares with a record 105.3 Bcf/d in December 2023.

That kept output on track to decline in 2024 for the first time since the COVID pandemic cut demand in 2020.

Many producers reduced drilling activities this year after average spot monthly prices at the U.S. Henry Hub benchmark in Louisiana fell to a 32-year low for the month of March, and have remained soft since then.

Meteorologists projected weather in the Lower 48 states will remain mostly near normal through Nov. 27 before turning colder than normal from Nov. 28-Dec. 6.

With colder weather coming, LSEG forecast average gas demand in the Lower 48, including exports, would rise from 107.8 Bcf/d this week to 115.7 Bcf/d next week. Those forecasts were lower than LSEG's outlook on Wednesday.

The amount of gas flowing to the seven big operating U.S. LNG export plants has risen to an average of 13.5 Bcf/d so far in November, up from 13.1 Bcf/d in October. That compares with a monthly record high of 14.7 Bcf/d in December 2023.

On a daily basis, LSEG said feedgas was on track to jump to an 11-month high of 14.5 Bcf/d on Thursday, up from 14.1 Bcf/d on Wednesday, as flows to a couple of plants rose to record highs.

Cameron LNG's 2.0-Bcf/d plant in Louisiana was on track to pull in a record 2.4 Bcf/d on Thursday, while flows to the first 1.8-Bcf/d phase of Venture Global's Plaquemines facility, which is under construction in Louisiana, was on track to rise to a record 60 million cubic feet per day on Thursday.

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 rose to 11-month highs of around $15 per MMBtu at both the Dutch Title Transfer Facility benchmark in Europe and the Japan-Korea Marker benchmark in Asia on worries about Russian supplies and the coming of colder winter weather.

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