U.S. NatGas Futures Rise on Soaring Global Prices, Low Output

(Reuters) — U.S. natural gas futures rose from a two-week low on Thursday as soaring global gas prices kept demand for U.S. liquefied natural gas (LNG) exports high and output remained sluggish after Hurricane Ida in late August.

Limiting price gains were a storage build in line with estimates and the five-year average, and forecasts for milder weather that would cap U.S. demand for gas.

The U.S. Energy Information Administration (EIA) said utilities added 76 billion cubic feet (bcf) of gas into storage during the week ended Sept. 17. That was close to the 75-bcf build analysts forecast in a Reuters poll and compared with an increase of 70 bcf in the same week last year and a five-year (2016-2020) average increase of 74 bcf.

Last week's injection boosted stockpiles to 3.082 trillion cubic feet (tcf), or 6.9% below the five-year average of 3.311 tcf for this time of year.

Front-month gas futures rose 9.8 cents, or 2.0%, to $4.903 per million British thermal units (mmBtu) at 11:01 a.m. EDT (1501 GMT). On Wednesday, the contract held at its lowest close since Sept. 7 for a second day in a row.

More analysts now expect the United States will have enough gas in storage for the winter heating season. They noted prices in New England and California should far exceed those in the rest of the country due to pipeline constraints and a reliance on what is now very expensive liquefied natural gas (LNG) in New England and severe drought, wildfires and lack of battery backup for intermittent renewable power sources in California, forcing greater use of gas to generate power this year.

Analysts said the storage situation was much worse in Europe, where prices have soared to record highs primarily because stockpiles in some countries were 20% or more below normal. With gas prices near record highs of around $24 per mmBtu in Europe and $27 in Asia, versus just about $5 in the United States, traders noted buyers around the world were purchasing all the super-chilled gas the United States can produce.

Despite reductions at several plants this month, data provider Refinitiv said, the amount of gas flowing to U.S. LNG export plants was only down to an average of 10.4 billion cubic feet per day (bcfd) so far in September, from 10.5 bcfd in August.

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 last week at Freeport LNG's plant in Texas during Tropical Storm Nicholas and what is expected to be a brief reduction this week at Cameron LNG's plant in Louisiana.

Refinitiv said gas output in the U.S. Lower 48 states fell to an average of 90.7 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.

About 0.5 bcfd, or 24%, of gas production in the U.S. Gulf of Mexico remained shut-in since Ida hit Louisiana on Aug. 29, government data showed on Tuesday.

With seasonally milder weather coming, Refinitiv projected average U.S. gas demand, including exports, would fall from 86.2 bcfd this week to 82.4 bcfd next week as air conditioning use declines.

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