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U.S. natgas futures hold near 13-year high ahead of storage report

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U.S. natural gas futures held near a 13-year high on Thursday as the market waited for direction from a federal report expected to show a smaller than usual storage build last week.

That lack of price movement came despite bearish forecasts for milder weather over the next two weeks, and some bullish factors, including a drop in U.S. output in recent days and soaring spot prices due to unusual cold in Alberta, Canada and unusual heat in the U.S. Mid Atlantic.

Analysts forecast U.S. utilities added 15 billion cubic feet (bcf) of gas to storage during the week ended April 8. That compares with an increase of 55 bcf in the same week last year and a five-year (2017-2021) average increase of 33 bcf.

If correct, last week’s increase would boost stockpiles to 1.397 trillion cubic feet (tcf), or 17.8% below the five-year average of 1.700 tcf for this time of the year.

U.S. front-month gas futures were unchanged at around $6.997 per million British thermal units (mmBtu) at 9:07 a.m. EDT (1307 GMT). On Wednesday, the contract closed at its highest since November 2008 for a third day in a row.

That put the front-month up about 11% for the week, on track to rise for a fifth week in a row for the first time since October 2021.

The premium of futures for June over May was on track to rise to a record high for a third day in a row.

U.S. gas futures have already soared about 87% so far this year with much higher prices in Europe keeping demand for U.S. liquefied natural gas (LNG) near record highs as several countries try to wean themselves off Russian gas after Russia invaded Ukraine on Feb. 24.

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Record demand for U.S. LNG has kept the front-month in technically overbought territory with a relative strength index (RSI) over 70 for a 12th day in a row for the first time since September 2019, and boosted the 12-month futures strip to its highest since November 2008 for a second day in a row.

One of the more surprising things about the recent U.S. price run-up is that while U.S. gas prices have soared about 51% over the past month, European gas, currently trading around $32 per mmBtu, fell about 10% as Russia keeps sending supplies via pipeline and LNG vessels keep delivering cargoes.

Despite recent gains, the U.S. gas market remains mostly shielded from much higher global prices because the United States, as the world’s top gas producer, has all the fuel it needs for domestic use and capacity constraints limit its ability to export more LNG no matter how high global prices rise.

Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 94.6 billion cubic feet per day (bcfd) so far in April from 93.7 bcfd in March. That compares with a monthly record of 96.3 bcfd in December.

On a daily basis, however, output has dropped about 1.9 bcfd over the past few days to a preliminary 93.4 bcfd on Thursday. Preliminary data is often revised.

The amount of gas flowing to U.S. LNG export plants slid from a record 12.9 bcfd in March to 12.4 bcfd so far in April due mostly to declines at Freeport LNG’s facility in Texas. The United States can turn about 13.2 bcfd of gas into LNG.

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