U.S. natgas hits fresh 7-wk high on cooler forecasts, record LNG exports

U.S. natural gas futures climbed about 2% to a fresh seven-week high on Friday on forecasts cold weather next week will cause utilities to pull gas out of storage to meet an increase in heating demand.

Analysts said those utilities likely injected gas into storage this week because the weather was mild and heating demand low.

U.S. prices also gained on Friday as rising global demand for gas to replace Russian fuel after Russia’s invasion of Ukraine keeps U.S. liquefied natural gas (LNG) exports near record highs and European gas prices about seven times over U.S. futures.

Front-month gas futures rose 8.5 cents, or 1.6%, to $5.486 per million British thermal units (mmBtu) at 11:15 a.m. EDT (1515 GMT), putting the contract on track for its highest close since Feb. 2 for a fourth day in a row.

That also puts the contract on track to rise for a fifth day in a row for the first time since January, and kept it in technically overbought territory with a relative strength index (RSI) over 70 for a third day in a row for the first time since September 2021.

For the week, the front-month was up about 14%, which would be its biggest weekly gain since January. Last week, the contract gained about 3%.

The U.S. market, however, remains mostly shielded from higher global prices because the United States has all the fuel it needs for domestic use, and the country’s ability to export more LNG is constrained by limited capacity.

The United States is already producing LNG near full capacity. So, no matter how high global gas prices rise, it will not be able to export much more of the supercooled fuel. European gas was trading little changed around $34 per mmBtu on Friday.

Before Russia’s Feb. 24 invasion of Ukraine, the United States worked with other countries to ensure gas supplies, mostly from LNG, would keep flowing to Europe. Russia has provided around 30% to 40% of Europe’s gas, which totaled about 18.3 billion cubic feet per day (bcfd) in 2021.

Data provider Refinitiv said average gas output in the U.S. lower 48 states was on track to rise to 93.3 bcfd in March from 92.5 bcfd in February as more oil and gas wells return to service after freezing earlier in the year. That compares with a monthly record of 96.2 bcfd in December.

With cooler weather coming, Refinitiv projected average U.S. gas demand, including exports, would rise from 97.3 bcfd this week to 103.4 bcfd next week before sliding to 98.6 bcfd in two weeks. The forecasts for this week and next were higher than Refinitiv’s outlook on Thursday.

The amount of gas flowing to U.S. LNG export plants rose to 12.81 bcfd so far in March from 12.43 bcfd in February and a record 12.44 bcfd in January. The United States has the capacity to turn about 12.7 bcfd of gas into LNG. The rest of the gas flowing to the plants is used to operate the facilities.

Traders said U.S. LNG exports would remain near record levels for as long as global gas prices trade 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 Russia could cut European supplies.