NEW YORK: US natural gas futures rose about 3% to one-week high on Wednesday on expectations US liquefied natural gas (LNG) will remain near record highs for months to come, after Russia halted exports to Poland and Bulgaria in its toughest retaliation so far against international sanctions over the war in Ukraine.
Russia halted gas supplies to Bulgaria and Poland on Wednesday for rejecting its demand for payment in roubles, causing gas prices in northwestern Europe to jump 5% on Tuesday and 9% so far on Wednesday.
US prices also gained support from forecasts for more gas demand in the United States over the next two weeks than previously expected, and a continued drop in US output due to a late-season cold snap that froze oil and gas wells in North Dakota.
In addition, energy traders said Wednesday’s trade could be volatile with the upcoming expiration of the US May futures.
“Today’s trading ... is likely to be dictated by the expiring May contract,” analysts at EBW Analytics said, noting “the expiring front-month has gained on final settlement day in 12 of the past 16 months.” The February contract soared by a record 46% on its expiration day.
On its last day as the US front-month, gas futures for May delivery was up 20.3 cents, or 3.0%, at $7.053 per million British thermal units (mmBtu) at 9:12 a.m. EDT (1312 GMT), putting the contract on track for its highest close since April 19.
Futures for June, which will soon be the front-month, gained about 2.9% to $7.18 per mmBtu. If the May and June futures close at these levels, June’s 16-cent premium over May would be a record high for the contracts.
US gas futures were up about 88% so far this year as higher global prices have kept demand for US LNG exports near record highs since Russia invaded Ukraine on Feb. 24. Gas was trading around $33 per mmBtu in Europe and $25 in Asia.
The US gas market, however, remains mostly shielded from those higher global prices because the United States is the world’s top gas producer, with all the fuel it needs for domestic use while capacity constraints inhibit exports of more LNG no matter how high global prices rise.
Data provider Refinitiv said average gas output in the US Lower 48 states rose to 94.1 billion cubic feet per day (bcfd) so far in April from 93.7 bcfd in March. That compares with a monthly record of 96.3 bcfd in December 2021.
On a daily basis, however, output was on track to drop about 4.3 bcfd due to the North Dakota freeze-offs since Saturday to a preliminary 90.6 bcfd on Wednesday, the lowest since early February.
Comments
Comments are closed.