NEW YORK: US natural gas futures on Thursday climbed about 3% to a 20-week high on a recent drop in daily output and forecasts for the weather to turn hotter than normal later in June.
That price increase occurred despite forecasts for milder weather and lower demand next week than previously expected.
A federal report later on Thursday is expected to show last week’s storage build was smaller than usual for this time of year after producers cut output over the past few months due to a drop in futures prices to 3-1/2-year lows in February and March.
Analysts forecast US utilities added 90 billion cubic feet (bcf) of gas into storage during the week ended May 31. That compares with an increase of 105 bcf in the same week last year and a five-year (2019-2023) average rise of 103 bcf for this time of year.
Analysts said that would leave gas stockpiles about 25% above normal for this time of year.
Front-month gas futures for July delivery on the New York Mercantile Exchange rose 8.9 cents, or 3.2%, to $2.846 per million British thermal units (mmBtu), putting the contract on track for its highest close since Jan. 17. Financial firm LSEG said gas output in the Lower 48 US states has slipped to an average of 98.0 billion cubic feet per day (bcfd) so far in June, down from 98.1 bcfd in May. That compares with a monthly record of 105.5 bcfd in December 2023.
On a daily basis, output was on track to drop by about 2.7 bcfd over the past five days to a preliminary 19-week low of 96.3 bcfd on Thursday.
Before this week, analysts said there were signs producers were boosting output due to a 47% jump in futures prices in April and May. Output rose from 96.5 bcfd on May 1 to a six-week high of 99.5 bcfd on May 24.
Overall, US gas production is still down around 9% so far in 2024 after several energy firms, including EQT and Chesapeake Energy, delayed well completions and cut drilling activities when prices fell in February and March.
EQT is the biggest US gas producer and Chesapeake is on track to become the biggest producer after its merger with Southwestern Energy.
Meteorologists projected weather across the Lower 48 states would remain warmer than normal through June 21 except for some near-normal days in the June 7-12 period.
LSEG forecast gas demand in the Lower 48, including exports, would ease from 93.7 bcfd this week to 93.1 bcfd next week. The forecast for next week was lower than LSEG’s outlook on Wednesday.
Gas flows to the seven big US LNG export plants have risen to 13.3 bcfd so far in June, up from 12.9 bcfd in May.
That, however, remains well below the monthly record high of 14.7 bcfd in December 2023 due to ongoing maintenance at several plants, including Cheniere Energy’s Sabine Pass and Venture Global’s Calcasieu Pass in Louisiana.
The US became the world’s biggest LNG supplier in 2023, ahead of recent leaders Australia and Qatar, as much higher global prices fed demand for more exports due in part to supply disruptions and sanctions linked to Russia’s invasion of Ukraine.
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