NEW YORK: US natural gas futures jumped about 5% to a five-week high on Friday on forecasts for hotter weather and higher demand next week than previously expected and ongoing problems with a turbine needed to boost output on the Russia-Germany Nord Stream gas pipe.
Extreme heat has already caused US power demand to hit all-time highs many times this summer in several regions, including Texas, as homes and businesses crank up air conditioners to escape the heat.
Power companies were burning lots of gas to produce all that power in part because coal prices were near record highs, making it uneconomic for many generators to switch to coal-fired plants.
The gas price increase came despite the ongoing outage at the Freeport liquefied natural gas (LNG) export plant in Texas, which has left more gas in the United States for utilities to inject into low stockpiles.
Freeport, the second-biggest US LNG export plant, was consuming about 2 billion cubic feet per day (bcfd) of gas before it shut on June 8. Freeport LNG estimated the facility will return to partial service in October. Some analysts expect the outage to last longer.
Front-month gas futures rose 40.9 cents, or 5.2%, to $8.341 per million British thermal units (mmBtu), putting the contract on track for its highest close since June 13.
For the week, the contract was up about 18%, putting it on track for a third week of gains after rising 16% last week and 5% two weeks ago. This week’s increase would be its biggest weekly percentage gain since August 2020 when it soared 24%.
So far this year, the gas front-month is up 121% as much higher prices in Europe and Asia keep demand for US LNG exports strong, especially since Russia’s invasion of Ukraine.
Gas was trading around $49 per mmBtu in Europe and $38 in Asia.
Russian gas exports on the three main lines into Germany - Nord Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route jumped to 3.7 bcfd on Thursday from around 1.4 bcfd over the past 10 days while Nord Stream was shut for maintenance.
That was the same as the 3.7-bcfd average during the month before Nord Stream shut but was still much lower than the 9.4 bcfd average in July 2021.
Gas flows on Nord Stream, however, may not rise much in the near future because a turbine Russia said was needed to boost output is stuck in transit in Germany because Moscow so far has not given the go-ahead to transport it back.
US gas futures lag far behind global prices because the United States is the world’s top producer, with all the fuel it needs for domestic use, while capacity constraints limit LNG exports.
Data provider Refinitiv said average gas output in the US Lower 48 states has risen to 96.1 bcfd so far in July from 95.3 bcfd in June. That compares with a monthly record high of 96.1 bcfd in December 2021.
Refinitiv projected average US gas demand including exports would slide from 101.1 bcfd this week to 100.6 bcfd next week and 99.9 bcfd in two weeks as extreme heat starts to ease in some parts of the country. The forecast for next week was higher than Refinitiv’s outlook on Thursday.
The average amount of gas flowing to US LNG export plants eased to 11.0 bcfd so far in July from 11.2 bcfd in June due to reductions at Cheniere Energy Inc’s Sabine Pass and Venture Global LNG’s Calcasieu Pass plants in Louisiana this week.
Comments
Comments are closed.