NEW YORK: US natural gas futures jumped about 5% to a three-week high on Monday on a continuing decline in output and forecasts for more demand next week than previously expected.
That price increase occurred despite forecasts for less demand this week than previously expected, forecasts for mild weather through mid-April, ample amounts of gas in storage and reduced amounts of gas flowing to liquefied natural gas (LNG) export plants due to ongoing repairs at Freeport LNG’s export plant in Texas.
Front-month gas futures for May delivery on the New York Mercantile Exchange were up 8.4 cents, or 4.8%, to $1.847 per million British thermal units (mmBtu) at 9:04 a.m. EDT (1304 GMT), putting the contract on track for its highest close since March 6.
With gas prices up about 6% last week, speculators cut their net short futures and options positions on the New York Mercantile and Intercontinental Exchanges for a fifth week in a row to their lowest since late January.
Gas prices have been depressed for months - falling to an intraday low of $1.481 per mmBtu on March 26, their lowest since June 2020 - after a mild winter with record output allowed utilities to leave significantly more gas in storage than usual for this time of year.
Gas stockpiles were about 41% above normal levels for this time of year.
Low prices should boost US gas use to a record high in 2024 but cut production for the first time since 2020 when the COVID-19 pandemic destroyed demand for the fuel, according to the US Energy Information Administration’s latest outlook.
Output was already down by around 6% over the past month as several energy firms, including EQT and Chesapeake Energy , delayed well completions and cut back on other drilling activities.
In the spot market, mild weather and ample hydro and other renewable power supplies in the US West cut electric prices in Arizona to record lows over the past couple of weeks.
Next-day power fell to negative $12 per megawatt hour at the Palo Verde hub in Arizona, according to data from SNL Energy on the LSEG terminal. That compares with prior all-time lows of negative $9 on March 27 and negative $8 on March 25.
Negative prices mean there is too much power in a region due to low demand and/or transmission constraints, and are used to encourage power generators to shut plants or pay to keep them running.