U.S. natgas futures jump 5% to 5-week high on hotter forecasts

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U.S. natural gas futures jumped about 5% to a five-week high on Friday on forecasts

for hotter weather and higher demand next week than previously expected and ongoing problems with a turbine

needed to boost output on the Russia-Germany Nord Stream gas pipe.

That puts the contract on track to gain about 53% in July, which would be its biggest monthly percentage

gain since hitting a record 63% in September 2009.

Extreme heat has already caused U.S. power demand to hit several all-time highs this summer in many

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states, including Texas, as homes and businesses crank up their air conditioners to escape the heat.

Electric companies were burning lots of gas to produce all that power in part because coal prices

were near record highs, making it uneconomic for many generators to switch to coal-fired plants.

The gas price increase came despite an increase in output to near record levels and 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 low stockpiles.

Freeport, the second-biggest U.S. LNG export plant, was consuming about 2 billion cubic feet per day

(bcfd) of gas before it shut on June 8. Freeport LNG estimated the facility will return to partial service in

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October. Some analysts expect the outage to last longer.

“Despite a few days of recent production being higher than ever recorded, it appears that these power

demand surges have largely offset the additional supply, resulting in below average storage injections and

storage expectations which have contributed heavily to the recent … run-ups,” analysts at Gelber &

Associates said in a note.

Front-month gas futures rose 36.7 cents, or 4.6%, to settle at $8.299 per million British thermal

units (mmBtu), putting the contract on track for its highest close since June 13.

For the week, the contract climbed for a third week in a row, gaining 18% in its biggest weekly percentage

gain since August 2020.

So far this year, the gas front-month is up 123% as much higher prices in Europe and Asia keep demand for

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U.S. LNG exports strong, especially since Russia’s invasion of Ukraine.

Gas was trading around $49 per mmBtu in Europe and $39 in Asia.

Russian gas exports on 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 jumped to 3.7

bcfd on Thursday from around 1.4 bcfd over the past 10 days while Nord Stream was shut for maintenance.

That was the same as the 3.7-bcfd average during the month before Nord Stream shut but was still much

lower than the 9.4 bcfd average in July 2021.

Gas flows on Nord Stream, however, may not rise much in the near future because a turbine Russia said was

needed to boost output is stuck in transit in Germany because Moscow so far has not given the go-ahead to

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transport it back.

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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 limit LNG exports.

Data provider Refinitiv said average gas output in the U.S. Lower 48 states has risen to 96.1 bcfd so far

in July from 95.3 bcfd in June. That compares with a monthly record high of 96.1 bcfd in December 2021.

Refinitiv projected average U.S. gas demand including exports would slide from 101.1 bcfd this week to

100.6 bcfd next week and 99.9 bcfd in two weeks as extreme heat starts to ease in some parts of the country.

The forecast for next week was higher than Refinitiv’s outlook on Thursday.

The average amount of gas flowing to U.S. LNG export plants eased to 11.0 bcfd so far in July from 11.2

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bcfd in June due to reductions at Cheniere Energy Inc’s Sabine Pass and Venture Global LNG’s Calcasieu

Pass plants in Louisiana this week.

Week ended Week ended Year ago Five-year

Jul 22 Jul 15 Jul 22 average

(Forecast) (Actual) Jul 22

U.S. weekly natgas storage change (bcf): +30 +32 +38 +32

U.S. total natgas in storage (bcf): 2,431 2,401 2,709 2,761

U.S. total storage versus 5-year average -12.0% -12.0%

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 7.81 7.93 3.82 3.73 2.89

Title Transfer Facility (TTF) 48.85 45.71 12.49 16.04 7.49

Japan Korea Marker (JKM) 38.10 38.17 13.77 18.00 8.95

Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days

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Two-Week Total Forecast Current Day Prior Day Prior Year 10-Year 30-Year

Norm Norm

U.S. GFS HDDs 3 3 2 3 3

U.S. GFS CDDs 257 253 211 213 204

U.S. GFS TDDs 260 256 213 216 207

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 95.9 96.3 96.2 92.8 85.6

U.S. Imports from Canada 7.9 8.1 8.3 7.8 8.1

U.S. LNG Imports 0.0 0.0 0.0 0.0 0.1

Total U.S. Supply 103.8 104.4 104.5 100.6 93.8

U.S. Demand (bcfd)

U.S. Exports to Canada 2.0 2.2 2.2 2.2 2.3

U.S. Exports to Mexico 6.3 6.2 6.2 6.7 5.2

U.S. LNG Exports 11.1 10.8 10.6 10.4 4.5

U.S. Commercial 4.3 4.4 4.4 4.4 4.4

U.S. Residential 3.5 3.5 3.6 3.6 3.6

U.S. Power Plant 43.7 45.7 45.3 38.9 39.6

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U.S. Industrial 21.3 21.3 21.3 20.6 20.8

U.S. Plant Fuel 4.7 4.8 4.8 4.8 4.7

U.S. Pipe Distribution 2.1 2.2 2.2 2.2 2.0

U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1

Total U.S. Consumption 79.7 82.0 81.6 74.6 75.2

Total U.S. Demand 99.2 101.1 100.6 93.9 87.2

U.S. weekly power generation percent by fuel – EIA

Week ended Week ended Week ended Week ended Week ended

Jul 22 Jul 15 Jul 8 Jul 1 Jun 24

Wind

Solar

Hydro

Other

Petroleum

Natural Gas

Coal

Nuclear

SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)

Hub Current Day Prior Day

Henry Hub 7.99 7.58

Transco Z6 New York 9.46 8.06

PG&E Citygate 8.89 8.60

Dominion South 7.47 6.86

Chicago Citygate 7.75 7.42

Algonquin Citygate 23.50 29.35

SoCal Citygate 8.71 8.76

Waha Hub 7.53 7.17

AECO 4.26 4.06

SNL U.S. Power Next-Day Prices ($ per megawatt-hour)

Hub Current Day

New England 240.50 257.50

PJM West 156.50 157.00

Ercot North 118.00 105.00

Mid C 59.33 68.25

Palo Verde 108.00 110.25

SP-15 92.75 100.00

(Reporting by Scott DiSavino; Editing by Paul Simao, Kirsten Donovan and Nick Zieminski)