U.S. natgas jumps 6% on output drop, hotter forecasts

Extreme heat has already boosted power demand to record highs as homes and businesses crank up their air conditioners across the country, including Texas, where conservation efforts saved the state’s grid operator from taking major emergency steps like rotating blackouts to avoid widespread outages. read more

The gas price jump came despite an overall rise in output so far this month and as the ongoing outage at the Freeport liquefied natural gas (LNG) export plant in Texas leaves more fuel in the United States for utilities to refill low storage.

Freeport, the second-biggest U.S. LNG export plant, was consuming about 2 billion cubic feet per day (bcfd) of gas before it shut on June 8. Freeport LNG has said the facility could return around Oct. 22. Some analysts, however, said the outage could last longer. read more

Front-month gas futures rose 41.6 cents, or 6.3%, to settle at $7.016 per million British thermal units (mmBtu), their highest close since June 16.

For the week, the contract was up for about 16% after rising about 5% last week. That was the biggest weekly percentage gain since mid-April.

So far this year, the front-month was up about 90% as much higher prices in Europe and Asia keep demand for U.S. LNG exports strong, especially since Russia’s invasion of Ukraine stoked fears Moscow would cut gas supplies to Europe.

Gas was trading around $47 per mmBtu in Europe , which is a four-month high, and $39 in Asia .

After the shutdown of Nord Stream 1 for maintenance on July 11, Russian gas exports on the three main lines into Germany – Nord Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route – have held around 1.4 bcfd.

That is down from an average of 3.7 bcfd in the month before Nord Stream shut and an average of 9.4 bcfd in July 2021.

The companies operating Nord Stream, led by Russian energy company Gazprom PAO , said the pipe should return around July 21. Analysts, however, said the outage could last longer. read more

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U.S. futures lag far behind global prices because the United States is the world’s top producer, with all the gas it needs for domestic use, while capacity constraints limit LNG exports.

Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 96.0 bcfd so far in July from 95.3 bcfd in June. That compares with a monthly record high of 96.1 bcfd in December 2021.

On a daily basis, however, output was on track to drop by 1.5 bcfd this week to a preliminary 94.7 bcfd on Friday due in part to recent problems at Kinder Morgan Inc’s (KMI.N) Tennessee Gas Pipeline in Pennsylvania, a ONEOK Inc (OKE.N) gas processing plant in Oklahoma and an Energy Transfer LP (ET.N) pipe in Texas. Preliminary data is often revised later in the day. read more

With hotter weather coming, Refinitiv projected average U.S. gas demand including exports would rise to around 100.2 bcfd over the next two weeks from 99.2 bcfd this week. The forecast for this week and next were slightly higher than Refinitiv’s outlook on Thursday.

The average amount of gas flowing to U.S. LNG export plants held at 11.2 bcfd so far in July, the same as June. That was down from 12.5 bcfd in May and a monthly record of 12.9 bcfd in March due to the Freeport outage.

The seven big U.S. export plants can turn about 13.8 bcfd of gas into LNG.