NEW YORK: US natural gas futures jumped about 5% to a fresh 21-week high on Monday as forecasts for hotter weather than previously expected will prompt power generators to burn more gas to keep air conditioners humming this week.
Traders said that price increase would have been much higher if not for low spot prices, small increases in output in recent weeks and the tremendous oversupply of gas still in storage.
Analysts said current gas stockpiles were still around 24% above normal levels for this time of year.
Front-month gas futures for July delivery on the New York Mercantile Exchange were up 15.2 cents, or 5.2%, to $3.070 per million British thermal units (mmBtu) at 8:51 a.m. EDT (1251 GMT), putting the contract on track for its highest close since Jan. 12 for a second day in a row.
That pushed the contract into technically overbought territory for the first time since late May.
Even though gas prices gained 13% last week, speculators cut their net long futures and options positions on the New York Mercantile and Intercontinental Exchanges for the first time in five weeks, according to the US Commodity Futures Trading Commission’s Commitments of Traders report.
One factor that has helped keep a lid on futures price spikes so far this year has been lower spot or next-day prices at the US Henry Hub benchmark in Louisiana.
Even though next-day prices at the Henry Hub were up about 7% to $2.46 per mmBtu for Monday, the spot market has traded below front-month futures for 94 out of 110 trading days so far this year, according to data from financial firm LSEG.
In other spot news, next-day gas at the AECO hub in Alberta, Canada fell to 61 cents per mmBtu for Monday, its lowest price since October 2022.
LSEG said gas output in the Lower 48 US states has slipped to an average of 98.0 billion cubic feet per day (bcfd) so far in June, down from 98.1 bcfd in May. That compares with a monthly record of 105.5 bcfd in December 2023.
On a daily basis, output was on track to slide by around 0.5 bcfd to a preliminary three-week low of 97.2 bcfd on Monday, down from 97.7 bcfd on Sunday. That output, however, was up about 0.6 bcfd from a 15-week low of 96.5 bcfd on May 1.
Analysts said the increase since May 1 was a sign producers were slowly boosting output following the 47% jump in futures prices in April and May.
Output hit a six-week high of 99.5 bcfd on May 24.
Overall, US gas production is still down around 8% so far in 2024 after several energy firms, including EQT and Chesapeake Energy, delayed well completions and cut drilling activities when prices fell in February and March.