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NEW YORK: US natural gas futures slid about 2% on Tuesday with a drop in US crude futures and on forecasts for milder weather and lower heating demand over the next two weeks than previously expected, which should allow utilities to inject gas into storage next week.

On its last day as the front-month, gas futures for April delivery fell 10.9 cents, or 2.0%, to $5.399 per million British thermal units (mmBtu) at 9:09 a.m. EDT (1309 GMT), putting the contract on track for its lowest close since March 23. Futures for May, which will soon be the front-month, were down about 2% to around $5.44 per mmBtu. US crude futures dropped around 6% on positive signals from Russia-Ukraine peace talks.

The US gas price decline came despite rising global demand for gas to replace Russian fuel as Russia’s invasion of Ukraine keeps US liquefied natural gas (LNG) exports near record highs and European gas prices about seven times over US futures.

The US market remains mostly shielded from higher global prices because the United States has all the fuel it needs for domestic use, and the country’s ability to export more LNG is constrained by limited capacity.

The United States is already producing LNG near full capacity. So, no matter how high global gas prices rise, it will not be able to export much more of the supercooled fuel.

Before Russia’s Feb. 24 invasion of Ukraine, the United States worked with other countries to ensure gas supplies, mostly from LNG, would keep flowing to Europe. Russia has provided around 30% to 40% of Europe’s gas, which totaled about 18.3 billion cubic feet per day (bcfd) in 2021.

Data provider Refinitiv said average gas output in the US lower 48 states was up 93.4 bcfd so far in March from 92.5 bcfd in February as more oil and gas wells return to service after freezing over the winter. That compares with a monthly record of 96.2 bcfd in December.

Refinitiv projected average US gas demand, including exports, would drop from 105.1 bcfd this week to 96.5 bcfd next week as the weather turns seasonally milder. Those forecasts were lower than Refinitiv’s outlook on Monday. The amount of gas flowing to US LNG export plants has risen to 12.88 bcfd so far in March from 12.43 bcfd in February and a monthly record 12.44 bcfd in January. The United States can turn about 12.7 bcfd of gas into LNG. The rest of the gas flowing to the plants is used to operate the facilities.

Traders said US LNG exports would remain near record levels for as long as global gas prices trade well above US futures as utilities around the world scramble for cargoes to meet surging demand in Asia and replenish low inventories in Europe, especially with the threat Russia could cut European supplies.

Gas stockpiles in Western Europe (Belgium, France, Germany and the Netherlands) were about 31% below the five-year (2017-2021) average for this time of year, according to Refinitiv. That compares with inventories about 17% below normal in the United States.

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