U.S. Natgas Prices Jump 5% to 3-Week High on Higher Demand Forecasts

U.S. natural gas futures jumped about 5% to a three-week high on Monday on a continuing decline in output and forecasts for more demand next week than previously expected.

That price increase occurred despite forecasts for less demand this week than previously expected, forecasts for mild weather through mid-April, ample amounts of gas in storage and reduced amounts of gas flowing to liquefied natural gas (LNG) export plants due to ongoing repairs at Freeport LNG’s export plant in Texas.

Front-month gas futures for May delivery on the New York Mercantile Exchange were up 8.4 cents, or 4.8%, to $1.847 per million British thermal units (mmBtu) at 9:04 a.m. EDT (1304 GMT), putting the contract on track for its highest close since March 6.

With gas prices up about 6% last week, speculators cut their net short futures and options positions on the New York Mercantile and Intercontinental Exchanges for a fifth week in a row to their lowest since late January.

Gas prices have been depressed for months – falling to an intraday low of $1.481 per mmBtu on March 26, their lowest since June 2020 – after a mild winter with record output allowed utilities to leave significantly more gas in storage than usual for this time of year.

Gas stockpiles were about 41% above normal levels for this time of year.

Low prices should boost U.S. gas use to a record high in 2024 but cut production for the first time since 2020 when the COVID-19 pandemic destroyed demand for the fuel, according to the U.S. Energy Information Administration’s latest outlook.

Output was already down by around 6% over the past month as several energy firms, including EQT and Chesapeake Energy, delayed well completions and cut back on other drilling activities.

In the spot market, mild weather and ample hydro and other renewable power supplies in the U.S. West cut electric prices in Arizona to record lows over the past couple of weeks.

Next-day power fell to negative $12 per megawatt hour at the Palo Verde hub in Arizona, according to data from SNL Energy on the LSEG terminal. That compares with prior all-time lows of negative $9 on March 27 and negative $8 on March 25.

Negative prices mean there is too much power in a region due to low demand and/or transmission constraints, and are used to encourage power generators to shut plants or pay to keep them running.

SUPPLY AND DEMAND

Financial firm LSEG said gas output in the Lower 48 U.S. states fell to an average of 100.8 billion cubic feet per day (bcfd) in March, down from 104.8 bcfd in February. That compares with a monthly record high of 105.6 bcfd in December 2023.

Meteorologists projected weather across the Lower 48 would remain mostly warmer than normal through April 16, except for some cold days from April 3-6.

With mostly seasonally warmer weather coming, LSEG forecast gas demand in the Lower 48, including exports, would fall from 104.0 bcfd this week to 101.1 bcfd next week. The forecasts for this week were lower than LSEG’s outlook on Friday, while its forecast for next week was higher.

Gas flows to the seven big U.S. LNG export plants fell to an average of 13.1 bcfd in March, down from 13.7 bcfd in February. That compares with a monthly record of 14.7 bcfd in December.

(Reporting by Scott DiSavino; Editing by Paul Simao)