US natgas up 2% to three-month high with hot weather coming in late June

Print 🖨

U.S. natural gas futures gained about 2% to a three-month high on Friday on forecasts for demand to soar as the weather turns hot in late June, especially in Texas.

Power use in Texas is expected to break records next week as homes and businesses crank up their air conditioners to escape the first heat wave of the 2023 summer season, the state’s power grid operator projected on Friday.

That will boost the amount of gas burned by power generators since Texas gets most of its power from gas. In 2022, about 49% of the state’s power came from gas-fired plants, with most of the rest from wind at 22%, coal at 16%, nuclear at 8% and solar at 4%, according to federal energy data.

In addition to preparing for the coming heat, utilities in Texas and other Gulf Coast states were working to restore power to over 570,000 customers left without service after severe storms battered the region.

Front-month gas futures for July delivery on the New York Mercantile Exchange rose 5.5 cents, or 2.2%, to $2.588 per million British thermal units (mmBtu) at 10:44 a.m. EDT (1444 GMT), putting the contract on track for its highest close since March 13.

That puts the front-month on track to rise for a fifth day in a row and a 10th time in the last 11 days.

Those gains also put the contract on track to remain in technically overbought territory with a relative strength index (RSI) over 70 for a second day in a row for the first time since mid-May.

For the week, the front-month was up about 16% after gaining about 4% last week. That would be the contract’s biggest weekly gain since it gained 23% in early March.

ROO.AI Oil and Gas Field Service Software

In Europe, meanwhile, gas prices at the Dutch Title Transfer Facility (TTF) benchmark in Europe dropped about 15% on Friday after rising about 65% over the prior seven days.

SUPPLY AND DEMAND

Data provider Refinitiv said average gas output in the U.S. Lower 48 states slid to 101.9 billion cubic feet per day (bcfd) so far in June, down from a monthly record of 102.5 bcfd in May.

As the wildfires in Alberta and other Canadian provinces die down, gas exports from Canada were on track to rise to 8.3 bcfd on Friday, up from 7.4 bcfd on Thursday and 7.2 bcfd on Tuesday and Wednesday.

That compares with average Canadian exports of 7.8 bcfd so far in June, 7.4 bcfd in May when the wildfires were raging, 8.3 bcfd so far in 2023 and 9.0 bcfd in 2022. About 8% of the gas consumed in, or exported from, the United States comes from Canada.

Meteorologists forecast the weather would remain mostly near normal from June 16-22 before turning hotter-than-normal from June 23-July 1.

With warmer weather coming, Refinitiv forecast U.S. gas demand, including exports, would rise from 93.2 bcfd this week to 96.0 bcfd next week and 101.8 bcfd in two weeks. The forecasts for this week and next were similar to Refinitiv’s outlook on Thursday.

Gas flows to the seven big U.S. LNG export plants fell to an average of 11.6 bcfd so far in June, down from 13.0 bcfd in May. That is well below the monthly record high of 14.0 bcfd in April due to maintenance at several facilities, including Cheniere Energy Inc’s Sabine Pass in Louisiana and Freeport LNG in Texas.