US natural gas futures on Monday rose from a six-week low last week as an increase in liquefied natural gas (LNG) exports was expected to boost demand this week. That price move came despite forecasts for lower than previously expected demand next week due to a projected moderation in the weather.
Front-month gas futures for November delivery on the New York Mercantile Exchange (NYMEX) were up 7 cents, or 3.2%, to $2.284 per million British thermal units (mmBtu) at 9:50 a.m. EDT (1350 GMT). On Friday, the contract closed at its lowest since August 27. Speculators last week cut their long positions on the NYMEX to their lowest since January 2009 as stockpiles returned to near normal levels for the first time in two years.
Analysts forecast utilities added 103 billion cubic feet (bcf) of gas to storage during the week ended October 11. That compares with an injection of 82 bcf during the same week last year and a five-year (2014-18) average build of 81 bcf for the period. If correct, the increase would boost stockpiles to 3.518 trillion cubic feet (tcf), topping the five-year average of 3.505 tcf for the first time since September 2017.
The amount of gas in inventory was as much as 33% below the five-year average in March 2019. But with production close to a record high, analysts said stockpiles should end the summer injection season at near normal levels of around 3.7 tcf on October 31. Recent price swings in gas futures pushed at-the-money implied volatility, a determinant of option premiums, to 48.3% on Friday, its highest level since January. Over the past year, implied volatility has swung wildly, hitting a record high of 117.5% in November and a record low of 18.6% in April.
Refinitiv projected gas demand in the lower 48 US states, including exports, would reach 86.5 billion cubic feet per day (bcfd) this week due to higher LNG exports, up from its previous forecast on Friday of 86.0 bcfd. Next week, however, Refinitiv forecast demand would only reach 85.9 bcfd, down from its previous projection of 86.5 bcfd on Friday as warmer weather lowers expected heating demand.
Gas flows to LNG export plants jumped to a preliminary record 7.0 bcfd on Monday with the return of Dominion Energy Inc's Cove Point terminal in Maryland, up from an average of 6.3 bcfd last week and the prior all-time daily high of 6.7 bcfd on Saturday. The separately, traders noted the Gemmata LNG vessel docked at Kinder Morgan Inc's Elba Island LNG export facility in Georgia. The vessel was full of LNG from Trinidad, according to data from Refinitiv. The first liquefaction train at the Elba export terminal entered service on October 4.
Pipeline flows to Mexico fell to 5.1 bcfd on Sunday from 5.4 bcfd on Saturday, according to Refinitiv data. That compares with an average of 5.5 last week and an all-time daily high of 5.9 bcfd on September 18. Gas production in the lower 48 states held at 93.4 bcfd on Sunday, the same as Saturday, according to Refinitiv data. That compares with an average of 93.0 bcfd last week and an all-time daily high of 93.8 bcfd on September 29.
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