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U.S. natgas up 4% on forecasts cooler weather will boost heating

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U.S. natural gas futures climbed about 4% to a one-week high on Friday on forecasts for demand to rise as the weather turns seasonally cooler and a slight increase in global gas prices that should keep demand for U.S. liquefied natural gas (LNG) strong.

Even though the forecasts called temperatures to decline with the approach of winter, those forecasts also predicted the weather would remain milder than normal through at least early November, keeping heating demand lower than usual for this time of year.

Front-month gas futures rose 20.6 cents, or 4.0%, to $5.321 per million British thermal units (mmBtu) at 8:07 a.m. EDT (1207 GMT), putting the contract on track for its highest close since Oct. 15.

For the week, however, the front-month was still off about 2%, which would put it down for a third week in a row for the first time since March. In early October, U.S. gas prices soared to their highest since 2008 on expectations global competition for LNG would keep demand for U.S. exports strong. But after weeks of mild weather, U.S. prices were down about 18% from that high amid a growing belief in the market that the United States will have more than enough gas in storage for the winter heating season.

Analysts expect U.S. gas inventories will reach 3.6 trillion cubic feet (tcf) by the start of the winter heating season in November, which they said would be a comfortable level even though it falls short of the 3.7 tcf five-year average.

In Europe, analysts say stockpiles were about 15% below normal for this time of year. Around the world, however, gas prices were still at or near record highs as utilities scramble to refill dangerously low gas inventories in Europe and meet insatiable demand in Asia. Shortages of coal, gas and oil have already caused power blackouts in China and several businesses in Europe and Asia to shut or curtail manufacturing activities.

Data provider Refinitiv said output in the U.S. Lower 48 states rose to an average of 92.1 billion cubic feet per day (bcfd) so far in October, up from 91.1 bcfd in September. That compares with a monthly record of 95.4 bcfd in November 2019.

Refinitiv projected average U.S. gas demand, including exports, would rise from 86.2 bcfd this week to 87.7 bcfd next week and 90.4 bcfd in two weeks as more homes and businesses start to turn on their heaters. Those forecasts were similar to Refinitiv estimates on Thursday.

Refinitiv said the amount of gas flowing to U.S. LNG export plants averaged 10.4 bcfd so far in October, the same as in September, and was expected to rise in coming weeks as some liquefaction trains exit maintenance outages.

With gas prices near $30 per mmBtu in Europe and $33 in Asia, versus just $5 in the United States, traders said buyers around the world will keep purchasing all the LNG the United States could produce.

But no matter how high global gas prices rise, the United States only has capacity to turn about 10.5 bcfd of gas into LNG. Global markets will have to wait until later this year to get more, when the sixth liquefaction train at Cheniere Energy Inc’s Sabine Pass and Venture Global LNG’s Calcasieu Pass in Louisiana are expected to start producing LNG in test mode.

Week ended Week ended Year ago Five-year

Oct 22 Oct 15 Oct 22 average

(Forecast) (Actual) Oct 22

U.S. weekly natgas storage change (bcf): 79 92 32 62

U.S. total natgas in storage (bcf): 3,540 3,461 3,951 3,674

U.S. total storage versus 5-year average -3.6% -4.2%

Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five Year

Last Year Average Average 2020 (2016-2020)

Henry Hub 5.19 5.12 2.84 2.13 2.66

Title Transfer Facility (TTF) 30.39 29.89 4.89 3.24 5.19

Japan Korea Marker (JKM) 33.46 35.56 5.97 4.22 6.49

Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days

Two-Week Total Forecast Current Day Prior Day Prior Year 10-Year 30-Year

Norm Norm

U.S. GFS HDDs 150 150 186 128 188

U.S. GFS CDDs 36 34 39 44 26

U.S. GFS TDDs 186 184 225 172 214

Refinitiv U.S. Weekly GFS Supply and Demand Forecasts

Prior Week Current Week Next Week This Week Five-Year

Last Year Average For Month

U.S. Supply (bcfd)

U.S. Lower 48 Dry Production 92.2 92.0 92.1 90.0 83.1

U.S. Imports from Canada 7.3 7.4 7.2 6.6 7.5

Sky Eye Measurement

U.S. LNG Imports 0.0 0.0 0.0 0.0 0.1

Sky Eye Measurement

Total U.S. Supply 99.5 99.4 99.4 96.6 90.7

U.S. Demand (bcfd)

U.S. Exports to Canada 2.4 1.9 1.9 2.3 2.0

U.S. Exports to Mexico 5.8 6.0 5.8 6.2 5.0

U.S. LNG Exports 10.6 10.7 10.5 8.1 3.7

U.S. Commercial 5.3 6.4 7.2 7.1 6.8

U.S. Residential 5.0 7.2 8.9 8.1 7.2

U.S. Power Plant 28.8 26.2 25.5 29.1 27.7

U.S. Industrial 20.8 21.3 21.4 22.6 21.6

U.S. Plant Fuel 4.6 4.5 4.6 4.5 4.5

U.S. Pipe Distribution 1.8 1.8 1.8 1.8 1.7

U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1

Total U.S. Consumption 66.4 67.6 69.5 73.3 69.6

Total U.S. Demand 85.2 86.2 87.7 89.9 80.3

SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)

Hub Current Day Prior Day

Henry Hub 4.94 4.87

Transco Z6 New York 4.60 4.25

PG&E Citygate 6.77 6.77

Dominion South 4.45 4.02

Chicago Citygate 4.92 4.85

Algonquin Citygate 4.59 4.39

SoCal Citygate 6.00 6.26

Waha Hub 4.77 4.77

SNL U.S. Power Next-Day Prices ($ per megawatt-hour)

Hub Current Day Prior Day

New England 58.75 60.00

PJM West 54.00 42.75

Ercot North 53.00 235.00

Mid C 61.83 67.75

Palo Verde 54.75 63.25

SP-15 54.00 62.25

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