U.S. natgas futures up 1% to 14-yr high as heat boosts spot prices

Reuters
·6 min read

Aug 18 (Reuters) - U.S. natural gas futures rose about 1% to a fresh 14-year high on Thursday as hot weather boosted spot prices across the country to multiyear highs amid record global gas prices and forecasts for more U.S. demand over the next two weeks than previously expected. That futures price increase also came ahead of a federal report expected to show a smaller than usual storage build last week when power generators burned lots of gas to keep air conditioners humming during a heat wave. Analysts forecast U.S. utilities added 34 billion cubic feet (bcf) of gas to storage during the week ended Aug. 12. That compares with an increase of 46 bcf in the same week last year and a five-year (2017-2021) average increase of 47 bcf. If correct, last week's increase would boost stockpiles to 2.535 trillion cubic feet (tcf), or 12.2% below the five-year average of 2.886 tcf for this time of the year. The small storage increase came despite the ongoing outage at the Freeport liquefied natural gas (LNG) export plant in Texas, which has left more gas in the United States for utilities to inject into stockpiles for next winter. Freeport LNG, the second-biggest U.S. LNG export plant, was consuming about 2 billion cubic feet per day (bcfd) of gas before it was shut on June 8. Freeport expects the plant to return to at least partial service in early October. Front-month gas futures rose 13.3 cents, or 1.4%, to $9.377 per million British thermal units (mmBtu) by 8:01 a.m. EDT (1201 GMT), putting the contract on track for its highest close since August 2008. That price increase pushed the front-month into technically overbought territory with a relative strength index (RSI) above 70 for the second time in three days. In the spot market, gas prices for Thursday rose to their highest since February 2014 at the Dominion South hub in Pennsylvania, February 2021 at the Henry Hub benchmark in Louisiana and February 2019 at the PG&E Gate in Northern California as homes and businesses across the country cranked up their air conditioners. So far this year, the gas front-month was up about 152% as higher prices in Europe and Asia keep demand for U.S. LNG exports strong. Global gas prices have soared this year following supply disruptions linked to Russia's invasion of Ukraine on Feb. 24. Global gas prices were on track to close at record levels around $70 per mmBtu in Europe and $57 in Asia. Russian gas exports via the three main lines into Germany - Nord Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route - averaged 2.5 bcfd so far in August, down from 2.8 bcfd in July and 10.4 bcfd in August 2021. TOP PRODUCER U.S. gas futures lag far behind global prices because the United States is the world's top producer with all the fuel it needs for domestic use, while capacity constraints and the Freeport outage prevent the country from exporting more LNG. Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 97.3 bcfd so far in August from a record 96.7 bcfd in July. With warmer weather expected, Refinitiv projected average U.S. gas demand, including exports, would rise from 95.5 bcfd this week to 96.9 bcfd next week. Those forecasts were higher than Refinitiv's outlook on Wednesday. The average amount of gas flowing to U.S. LNG export plants held at 10.9 bcfd so far in August, the same as July. That compares with a monthly record of 12.9 bcfd in March. The seven big U.S. export plants can turn about 13.8 bcfd of gas into LNG. Week ended Week ended Year ago Five-year Aug 12 Aug 5 Aug 12 average (Forecast) (Actual) Aug 12 U.S. weekly natgas storage change (bcf): +34 +44 +46 +47 U.S. total natgas in storage (bcf): 2,535 2,501 2,815 2,886 U.S. total storage versus 5-year average -12.2% -11.9% Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five Year Last Year Average Average 2021 (2017-2021) Henry Hub 9.34 9.24 4.03 3.73 2.89 Title Transfer Facility (TTF) 68.43 67.13 15.43 16.04 7.49 Japan Korea Marker (JKM) 56.82 56.72 16.36 18.00 8.95 Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days Two-Week Total Forecast Current Day Prior Day Prior Year 10-Year 30-Year Norm Norm U.S. GFS HDDs 2 1 2 4 7 U.S. GFS CDDs 208 209 207 189 175 U.S. GFS TDDs 210 210 209 193 182 Refinitiv U.S. Weekly GFS Supply and Demand Forecasts Prior Week Current Week Next Week This Week Five-Year Last Year Average For Month U.S. Supply (bcfd) U.S. Lower 48 Dry Production 97.6 96.6 96.8 93.6 86.5 U.S. Imports from Canada 7.9 7.1 7.8 8.1 8.0 U.S. LNG Imports 0.0 0.0 0.0 0.0 0.1 Total U.S. Supply 105.5 103.8 104.6 101.7 94.6 U.S. Demand (bcfd) U.S. Exports to Canada 2.7 2.5 2.5 2.5 2.5 U.S. Exports to Mexico 5.6 5.8 5.8 6.3 5.4 U.S. LNG Exports 10.9 10.9 10.9 10.8 4.4 U.S. Commercial 4.4 4.5 4.5 4.5 4.5 U.S. Residential 3.5 3.5 3.6 3.5 3.4 U.S. Power Plant 46.4 40.1 41.4 39.5 38.8 U.S. Industrial 21.3 21.3 21.3 21.0 21.2 U.S. Plant Fuel 4.8 4.8 4.8 4.8 4.8 U.S. Pipe Distribution 2.2 2.0 2.1 2.0 2.1 U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1 Total U.S. Consumption 82.8 76.3 77.8 75.4 74.9 Total U.S. Demand 101.9 95.5 96.9 95.0 87.2 U.S. weekly power generation percent by fuel - EIA Week ended Week ended Week ended Week ended Week ended Aug 19 Aug 12 Aug 5 Jul 29 Jul 22 Wind 6 6 8 7 8 Solar 3 3 3 3 3 Hydro 6 5 5 5 6 Other 2 2 2 2 2 Petroleum 0 0 0 0 0 Natural Gas 42 45 42 42 45 Coal 22 22 21 22 22 Nuclear 19 17 17 17 17 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu) Hub Current Day Prior Day Henry Hub 9.51 9.28 Transco Z6 New York 8.44 8.41 PG&E Citygate 10.45 10.35 Dominion South 8.27 8.18 Chicago Citygate 8.89 8.77 Algonquin Citygate 8.55 8.43 SoCal Citygate 11.99 12.10 Waha Hub 8.60 8.51 AECO 2.74 3.10 SNL U.S. Power Next-Day Prices ($ per megawatt-hour) Hub Current Day New England 82.75 77.50 PJM West 92.25 101.00 Ercot North 109.25 317.00 Mid C 138.75 195.00 Palo Verde 127.75 144.50 SP-15 129.00 175.00 (Reporting by Scott DiSavino; Editing by Kirsten Donovan)