U.S. natural gas futures soared close to a seven-year high on Monday as record global gas prices kept demand for U.S. liquefied natural gas (LNG) exports strong.
Traders noted U.S. prices increased despite forecasts for milder weather and lower demand next week than previously expected.
On its second to last day as the front-month, gas futures for October delivery rose 31.4 cents, or 6.1%, to $5.454 per million British thermal units (mmBtu) at 9:03 a.m. EDT (1303 GMT), putting the contract on track to close at its highest levels since Sept. 15 when it hit a seven-year high of $5.46.
November futures, which will soon be the front-month, were up 32 cents to $5.52 per mmBtu.
Even though the front-month is rising toward a seven-year high, gas speculators last week cut their net long positions on the New York Mercantile and Intercontinental Exchanges for a second week in row to their lowest since May in anticipation U.S. prices could drop later this week if U.S. utilities keep adding more gas to storage than usual, according to data from the Commodity Futures Trading Commission (CFTC).
U.S. utilities injected more gas than usual into stockpiles over the past two weeks and were expected to do so again in the latest inventory report, cutting the deficit to the five-year (2016-2020) average from about 6.9% to about 6.5%. That compares with massive deficits of over 20% in some European countries, according to analysts, which is one of the biggest reasons why prices in Europe are at record levels.
Data provider Refinitiv said gas output in the U.S. Lower 48 states fell to an average of 90.8 billion cubic feet per day (bcfd) so far in September from 92.0 bcfd in August, due mostly to Hurricane Ida-related losses along the Gulf Coast. That compares with a monthly record of 95.4 bcfd in November 2019.
With the coming of cooler weather, Refinitiv projected average U.S. gas demand, including exports, would rise from 82.6 bcfd this week to 83.3 bcfd next week as consumer start to heat their homes and businesses. Next week's forecast, however, was lower than Refinitiv projected on Friday.
With gas prices at or near record highs of around $26 per mmBtu in Europe and $28 in Asia versus just over $5 in the United States, traders said buyers around the world would keep purchasing all the LNG the United States could produce.
Despite reductions at several plants this month, the amount of gas flowing to U.S. LNG export plants slipped modestly to an average of 10.4 bcfd so far in September from 10.5 bcfd in August, according to Refinitiv.
That small LNG feedgas decline came despite a three-week maintenance outage at Berkshire Hathaway Energy's Cove Point facility in Maryland, a brief shutdown at Freeport LNG's plant in Texas during Tropical Storm Nicholas and a brief reduction last week at Cameron LNG's plant in Louisiana.
No matter how high global prices rise, however, the United States only has the capacity to turn about 10.5 bcfd of gas into LNG. Global markets will likely have to wait until later this year to get more from the United States when the sixth liquefaction train at Cheniere Energy Inc's Sabine Pass and Venture Global LNG's Calcasieu Pass in Louisiana start producing LNG in test mode.
(Reporting by Scott DiSavino; Editing by Kirsten Donovan) ((email@example.com; +1 332 219 1922; Reuters Messaging: firstname.lastname@example.org))