US natural gas futures climb to 7-year high on rising demand forecasts

US natural gas futures jumped more than 3% to a fresh seven-year high on Monday on forecasts for higher demand next week than previously expected, as air conditioning use remains strong in many parts of the country and heating demand starts to pick up in other areas.

Traders also noted prices were climbing as record global gas prices keep demand for US exports high at the same time that more than half of US production in the Gulf of Mexico remains shut-in two weeks after Hurricane Ida hit the Gulf Coast, and US gas inventories, like those in Europe, remain lower than normal heading into the winter heating season when demand for the fuel peaks.

Front-month gas futures were up 18.2 cents, or 3.7%, to $5.120 per million British thermal units (mmBtu) at 8:39 a.m. EDT (1239 GMT), putting the contract on track for its highest close since February 2014.

With the front-month up about 28% since late August when Ida entered the Gulf of Mexico, gas speculators boosted their net long positions on the NYMEX and Intercontinental Exchange last week for a second week in a row for the first time since early June, according to data from the Commodity Futures Trading Commission (CFTC).

US natural gas on track for fresh 7-year high despite big storage build

Data provider Refinitiv said gas output in the US Lower 48 states has fallen to an average of 90.1 billion cubic feet per day (bcfd) so far in September, from 92.0 bcfd in August, due mostly to Ida-related losses along the Gulf Coast. That compares with a monthly record of 95.4 bcfd in November 2019.

About 1.2 bcfd, or 54%, of gas production in the Gulf of Mexico remains shut-in since Ida, according to government data. US power company Entergy Corp, meanwhile, said about 100,000 of its Louisiana customers were still without service, down from a peak of 902,000 who lost power due to Ida.

Refinitiv projected average US gas demand, including exports, would rise from 87.2 bcfd this week to 87.5 bcfd next week. Next week's forecast was higher than Refinitiv expected on Friday.

The amount of gas flowing to US liquefied natural gas (LNG) export plants has risen to an average of 10.9 bcfd so far in September, from 10.5 bcfd in August, as buyers around the world keep purchasing all the super-chilled gas the United States can produce. That compares with a monthly record of 11.5 bcfd in April.

Gas in Europe and Asia was trading around $21 and $19 per mmBtu, respectively, compared with just $5 for the US fuel. Gas at the Title Transfer Facility (TTF) in the Netherlands, the European benchmark, was at a record high.