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(Reuters) – U.S. natural gas futures climbed about 2% to a two-week high on Friday on lower output so far this month and a jump in global gas prices that could boost demand for more U.S. liquefied natural gas (LNG) exports.
Earlier in the session, U.S. gas futures were down on forecasts for mild weather through early November that should keep U.S. heating demand low and allow utilities to inject more gas into U.S. storage than is usual for this time of year.
Front-month gas futures for November delivery on the New York Mercantile Exchange rose 3.8 cents, or 1.5%, to settle at $2.560 per million British thermal units (mmBtu), their highest close since Oct. 11 for a second day in a row. That put the front-month up about 13% this week after it fell about 22% over the prior three weeks.
Analysts projected utilities were on track to inject more gas into storage this week than normal for a second week in a row for the first time since October 2023.
Prior to last week, injections had been smaller than usual for 14 weeks in a row because many producers so far this year have reduced drilling activities after average spot monthly prices at the U.S. Henry Hub benchmark in Louisiana fell to a 32-year low in March. Prices have remained relatively low since then.
SUPPLY AND DEMAND
Financial group LSEG said average gas output in the Lower 48 U.S. states slipped to 101.5 billion cubic feet per day (bcfd) so far in October, down from 101.8 bcfd in September. That compares with a record 105.5 bcfd in December 2023.
With so many firms curtailing drilling activities, analysts have projected that average output in calendar 2024 will decline for the first time since 2020 when the COVID-19 pandemic cut demand for the fuel.
The reduction in drilling activities was clear in Pennsylvania where drillers this week cut the number of rigs operating by one to a total of just 12, the lowest since July 2007, according to data from energy services firm Baker Hughes.
Meteorologists projected the weather in the Lower 48 states would remain warmer than normal through at least Nov. 9. But even warmer than normal weather in early November is cooler than warmer than normal weather in late October.
So, with seasonally cooler weather coming, LSEG forecast average gas demand in the Lower 48, including exports, would rise from 95.4 bcfd this week to 99.2 bcfd next week and 102.4 bcfd in two weeks.
The amount of gas flowing to the seven big U.S. liquefied natural gas (LNG) export plants rose to an average of 13.0 bcfd so far in October, up from 12.7 bcfd in September. That compares with a monthly record high of 14.7 bcfd in December 2023.
Analysts have noted that overall LNG feedgas will likely remain below record levels for at least a couple more weeks while some firms conduct maintenance on their plants in Louisiana, including Cheniere Energy at Sabine and Cameron LNG at Cameron.
The U.S. became the world’s biggest LNG supplier in 2023, ahead of recent leaders Australia and Qatar, as much higher global prices feed demand for more exports due in part to supply disruptions and sanctions linked to Russia’s invasion of Ukraine in February 2022.
Gas prices climbed to a 10-month high near $14 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe and a six-week high also near $14 at the Japan Korea Marker (JKM) benchmark in Asia.
Reporting by Scott DiSavino; Editing by Nick Zieminski and Leslie Adler
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