U.S. Natural Gas Prices Climb 3% On Cooler Weather, Despite Larger-Than-Expected Storage Build

(Reuters) - U.S. natural gas futures climbed about 3% to a one-week high on Thursday on forecasts for cooler weather and more heating demand over the next two weeks than previously expected and on rising prices for gas in global markets that should boost the value of U.S. liquefied natural gas (LNG) exports.

That price increase came despite a bearish bigger-than-expected weekly storage build that was also bigger than the five-year average for the first time in 15 weeks.

Front-month gas futures for November delivery on the New York Mercantile Exchange rose 7 cents, 3.0%, to $2.412 per million British thermal units (MMBtu) at 10:41 a.m. EDT (1441 GMT), putting the contract on track for its highest close since Oct. 15.

The U.S. Energy Information Administration (EIA) said utilities added 80 billion cubic feet (Bcf) of gas into storage during the weekend of Oct. 18.

That was much bigger than the 60-Bcf build analysts forecast in a Reuters poll, and it compares with an increase of 81 Bcf in the same week last year and a five-year (2019–2023) average rise of 76 Bcf for this time of year.

Lower injections in recent weeks came because 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 in March. Prices have remained relatively low since then.

 

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.

On a daily basis, output was on track to drop by around 2.0 Bcfd over the past six days to a preliminary two-week low of 100.8 Bcfd on Thursday. Analysts, however, have noted that preliminary data is often revised later in the day.

With so many firms curtailing drilling activities, analysts have projected average output in calendar 2024 would decline for the first time since 2020 when the COVID-19 pandemic cut demand for the fuel.

Even though the latest forecasts were for lower temperatures than previously expected in coming weeks, meteorologists still expect the weather in the Lower 48 states to remain warmer than normal through at least Nov. 8.

With cooler weather coming, LSEG forecasts that average gas demand in the Lower 48 — including exports — would rise from 95.1 Bcfd this week to 99.4 Bcfd next week. The forecast for this week was lower than LSEG's outlook on Wednesday.

The amount of gas flowing to the seven big U.S. liquefied natural gas (LNG) export plants rose to an average of 13.0 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 on track to close at a 10-month high over $13 per MMBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe and a five-week high near $14 at the Japan Korea Marker (JKM) benchmark in Asia.

Analysts said worries about possible supply disruptions from geopolitical tensions in the Middle East and Ukraine were supporting gas prices in Europe.

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