NEW YORK: US natural gas futures jumped by about 5% on Friday and a record 33% for the week to a 13-week high as the amount of gas flowing to liquefied natural gas export plants increased with the return of Freeport LNG in Texas and on forecasts for much warmer weather next week, especially in Texas, that will prompt power generators to burn more gas to meet air conditioning demand.
In other LNG news, Cheniere Energy, the nation’s biggest LNG company, said it does not anticipate any long outages at its export plants this summer and noted the expansion of its Corpus Christi plant in Texas was still on track to produce first LNG (at least in test mode) by the end of 2024.
Front-month gas futures for June delivery on the New York Mercantile Exchange rose 10.7 cents, or 5.3%, to settle at $2.142 per million British thermal units (mmBtu), their highest close since Jan. 29.
That put the contract up by a record 33% for the week after it lost roughly 10% over the prior three weeks. That topped the prior weekly record high of 29% in October 1990.
US gas production was down about 9% so far in 2024 after several energy firms, including EQT and Chesapeake Energy, delayed well completions and cut back on other drilling activities after prices fell to 3-1/2-year lows in February and March.
EQT is currently the biggest US gas producer and Chesapeake is on track to become the biggest producer after its merger with Southwestern Energy.
Traders noted that if US crude prices continue to decline - crude futures were down about 7% this week - some drillers could cut back on oil production in shale basins that also produce a lot of associated gas, like the Permian in Texas and New Mexico and the Bakken in North Dakota.
There are signs this may already be occurring in some parts of the US where the total oil and gas rig count fell this week to its lowest since January 2022, according to energy services provider Baker Hughes.
Any reduction in associated gas could cause overall gas output to collapse since high crude prices enable energy firms to keep making money by drilling for oil even when gas prices are negative like they were at the Waha hub in the Permian Shale in West Texas in early to mid-April.
In the spot market, meanwhile, analysts said upcoming gas pipeline maintenance on US energy company Kinder Morgan’s Permian Highway Pipeline from May 7-12 and Gulf Coast Express from May 14-21 could push average next-day gas prices at the Waha back into negative territory for the first time since mid-April.
Reductions on those and other pipes in Texas over the past month or so trapped gas in the Permian and helped push Waha prices below zero for several days last month.
Financial firm LSEG said gas output in the Lower 48 US states fell to an average of 96.3 billion cubic feet per day (bcfd) so far in May, down from 98.1 bcfd in April. That compares with a monthly record of 105.5 bcfd in December 2023.
LSEG forecast gas demand in the Lower 48, including exports, would rise from 91.4 bcfd this week to 92.3 bcfd next week before sliding to 89.5 bcfd in two weeks. The forecasts for this week and next week were lower than LSEG’s outlook on Thursday.
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