U.S. Natgas Prices up 3% to 8-Month High Ahead of Storage Report

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U.S. natural gas futures climbed about 3% to an eight-month high on Thursday on a drop in output and forecasts for seasonally cooler weather that will boost heating demand.

That increase also came ahead of a federal storage report expected to show a smaller-than-normal build last week when mild weather kept demand for heating and cooling low.

Analysts forecast U.S. utilities added 92 billion cubic feet (bcf) of gas into storage during the week ended Sept. 29. That compares with an increase of 126 bcf in the same week last year and a five-year (2018-2022) average increase of 103 bcf.

If correct, last week’s increase would boost stockpiles to 3.451 trillion cubic feet (tcf), or 5.4% above the five-year average of 3.273 tcf for the time of year.

Front-month gas futures for November delivery on the New York Mercantile Exchange rose 7.5 cents, or 2.5%, to $3.037 per million British thermal units (mmBtu) at 9:05 a.m. EDT (1305 GMT), putting the contract on track for its highest close since Jan. 27.

Financial firm LSEG said average gas output in the lower 48 U.S. states slid to 102.2 billion cubic feet per day (bcfd) so far in October, down from 102.9 bcfd in September and a monthly record high of 103.1 bcfd in August.

On a daily basis, output dropped by 1.4 bcfd over the past two days to a preliminary 14-week low of 101.2 bcfd on Thursday. Energy analysts, however, have said that preliminary data is often revised later in the day.

Meteorologists forecast the weather in the lower 48 states would remain mostly near normal through Oct. 20.

LSEG forecast U.S. gas demand, including exports, would rise from 94.8 bcfd this week to 95.5 bcfd next week as the normal seasonal cooling of the weather boosts heating demand. The forecast for this week was lower than LSEG’s outlook on Wednesday, while the forecast for next week was higher.

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RISING EXPORTS

Pipeline exports to Mexico rose to an average of 7.3 bcfd so far in October, up from a record 7.2 bcfd in September, according to LSEG data.

Analysts expect exports to Mexico to rise even higher in coming months once New Fortress Energy’s plant in Altamira starts pulling in U.S. gas to turn into liquefied natural gas (LNG) for export.

Gas flows to the seven big U.S. LNG export plants slid to 12.4 bcfd so far in October, down from 12.6 bcfd in September and a record high of 14.0 bcfd in April.

Energy traders said they expected Berkshire Hathaway Energy’s 0.8-bcfd Cove Point facility in Maryland to exit a maintenance outage over the next week or so based in part on company notices to customers that some pipeline work was expected to be completed on Oct. 4. Cove Point shut around Sept. 20. Analysts at LSEG have said the plant usually shuts for about three weeks of maintenance each autumn.

The U.S. is on track to become the world’s biggest LNG supplier in 2023, ahead of recent leaders Australia and Qatar. Much higher global prices have fed demand for U.S. exports due to supply disruptions and sanctions linked to the war in Ukraine.

Gas was trading around $11 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe and $14 at the Japan Korea Marker (JKM) in Asia.

(Reporting by Scott DiSavino)