NEW YORK: US natural gas futures eased on Thursday as the US market continued its three-day streak of following sharp moves in European gas and global oil prices with the Russia-Ukraine conflict stoking energy supply concerns.
Gas futures at the Title Transfer Facility (TTF) in the Netherlands dropped as much as 22% on Thursday, after soaring over 100% since Russia invaded Ukraine on Feb. 24.
In recent months, the US gas market has mostly shrugged off what was happening in Europe, focusing more on domestic weather and supply and demand. Since the start of 2022, gas prices in the United States have moved in the opposite direction of Europe more than half the time.
That is different than during the fourth quarter of 2021 when US futures followed European prices about two-thirds of the time.
But it has been hard for the US market to ignore the massive gains in global oil and gas prices in recent days - especially since those higher gas prices will keep demand for US liquefied natural gas (LNG) exports strong for months.
No matter how high global gas prices rise, however, the United States, the world’s biggest gas producer, cannot make much more LNG since it is already producing the supercooled fuel at near full capacity.
So, the United States worked with other countries, before the Russian invasion, to ensure that gas supplies, mostly from LNG, would keep flowing to Europe. Russia, the world’s second-biggest gas producer, usually provides around 30% to 40% of Europe’s gas, which totalled about 16.3 billion cubic feet per day (bcfd) in 2021. Thursday’s US price decline came despite an expected bigger-than-usual storage withdrawal last week when colder-than-normal weather boosted heating demand. The US Energy Information Administration (EIA) said utilities pulled 139 billion cubic feet (bcf) of gas from storage during the week ended Feb. 25.
That was in line with the 138-bcf withdrawal analysts forecast in a Reuters poll and compares with a decline of 132 bcf in the same week last year and a five-year (2017-2021) average decline of 98 bcf. Front-month gas futures fell 4.0 cents, or 0.8%, to settle at $4.722 per million British thermal units (mmBtu). On Wednesday, the contract closed at its highest since Feb. 3.
US oil prices, meanwhile, soared to their highest since 2008 on Thursday on Russian supply concerns before turning negative on rumors that a nuclear deal with Iran was close, which would allow Iran to export more oil.
Data provider Refinitiv said average gas output in the US Lower 48 states was on track to rise to 93.1 bcfd in March from 92.5 bcfd in February as more oil and gas wells return to service after freezing earlier in the year. That compares with a monthly record of 96.2 bcfd in December. With seasonally warmer weather coming, Refinitiv projected average US gas demand, including exports, would drop from 121.9 bcfd this week to 108.4 bcfd next week. The forecast for next week was a little higher than Refinitiv’s outlook on Wednesday.
The amount of gas flowing to US LNG export plants slid from a record 12.44 bcfd in January to 12.43 bcfd in February and 12.23 bcfd so far in March.
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