NEW YORK: US natural gas futures climbed about 3% to a 16-week high on Wednesday on a decline in output in recent days and forecast for more demand this week than previously expected.
Front-month gas futures for November delivery on the New York Mercantile Exchange were up 7.3 cents, or 2.55%, to $2.969 per million British thermal units (mmBtu) at 9:18 a.m. EDT (1318 GMT), putting the contract on track for its highest close since June 12.
That price gain kept the front-month in technically overbought territory for a fourth day in a row for the first time since May.
Recent increases in the November front-month contract have cut the premium of futures for December over November to roughly 38 cents per mmBtu, the lowest since November 2022.
In other gas markets, the volume of shares traded in the US Natural Gas Fund (UNG) jumped to 13.9 million contracts on Oct. 1, the most since March 2022. That compares with record volume of 125.4 million contracts on April 21, 2020 and daily averages of 3.6 million so far this year, 3.7 million in 2023 and 5.3 million during the prior five years (2018-2022).
UNG is an exchange-traded fund (ETF) designed to track the daily price movements of gas.
Another factor supporting prices in recent weeks - the front-month has gained about 44% over the past five weeks - was a drop in the amount of fuel going into storage for the 2024-2025 winter heating season.
Storage injections in July, August and likely in September were at record lows, according to federal energy data going back to 1997.
That’s because many producers reduced their drilling activities this year after average spot monthly prices at the US Henry Hub benchmark in Louisiana fell to a 32-year low in March. They have remained relatively low since that time.
Even though storage injections have been lower than usual in 19 of the past 20 weeks, however, the amount of gas in inventory was still about 6% above normal levels for this time of year due to low heating demand during the mild winter of 2023-2024.
One factor that has weighed on gas prices in recent days was the reduction in the amount that gas power generators need to burn, with over 1.3 million homes and businesses still without power in the US Southeast and Midwest after Hurricane Helene battered the region late last week.
The US National Hurricane Center projected that there was a 40% chance that a tropical cyclone could form in the Gulf of Mexico over the next week.
Financial firm LSEG said gas output in the Lower 48 US states has fallen to an average of 100.5 billion cubic feet per day (bcfd) so far in October, down from 101.8 bcfd in September. That compares with a record 105.5 bcfd in December 2023.
LSEG forecast average gas demand in the Lower 48, including exports, will hold around 95.4 bcfd this week and next.
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