U.S. natgas futures up 2% to 5-week high on hotter weather forecasts

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U.S. natural gas futures gained about 2% to a five-week high on Friday on forecasts

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

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

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

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

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

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

One factor weighing on gas prices this summer was 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

October. Some analysts expect the outage to last longer.

Front-month gas futures on the New York Mercantile Exchange (NYMEX) were up 13.5 cents, or 1.7%, to

$8.067 per million British thermal units (mmBtu) at 8:29 a.m. EDT (1229 GMT), putting the contract on track

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for its highest close since June 13.

For the week, the contract was up about 15%, putting it on track for a third week of gains after rising

16% last week and 5% two weeks ago.

Those gas price increases came at the same time oil futures dropped, cutting oil’s premium over gas

to its lowest since November 2020. Over the last several years, that premium has prompted U.S. energy firms to

focus most of their drilling activity on finding more oil instead of gas because crude was by far the more

valuable commodity.

The oil-to-gas ratio, or level at which oil trades compared with gas, dropped to 12-to-1 on Friday. So far

in 2022, crude has traded about 17 times over gas. That compares with crude’s average premium over gas of 19

times in 2021 and a five-year average (2017-2021) of 20 times. On an energy equivalent basis, oil should trade

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only six times over gas.

So far this year, the gas front-month is up 117% as much higher prices in Europe and Asia keep demand for

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

Gas was trading around $49 per mmBtu in Europe and $38 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.

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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

transport it back.

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.

Week ended Week ended Year ago Five-year

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Jul 225 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

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

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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

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

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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)