US Natgas Up 2% on Big Storage Draw, Near Record LNG Exports

(Reuters) — U.S. natural gas futures gained around 2% as near-record LNG exports caused utilities to pull more of the fuel from storage last week than expected and on forecasts for more heating demand over the next two weeks.

U.S. LNG exports have been strong in recent months because global oil and gas prices have traded at or near record highs — especially since Russia's invasion of Ukraine stoked new energy supply concerns. Russia is the world's second-biggest producer of gas behind the United States.

After soaring to an all-time high over $106 per million British thermal units (MMBtu) on Monday, European gas futures collapsed 30% on Wednesday and were down about 10% on Thursday as gas supplies stabilized with continued high flows from Russia and massive LNG imports from around the world. That supply stabilization prompted traders to take profits.

Before the invasion, the United States worked with other countries to ensure gas supplies, mostly from LNG, would keep flowing to Europe. Russia usually provides around 30% to 40% of Europe's gas, which totaled about 16.3 billion cubic feet per day (Bcfd) in 2021.

The U.S. Energy Information Administration (EIA) said utilities pulled 124 billion cubic feet (Bcf) of gas from storage during the week ended March 4.

That was higher than the 117-bcf withdrawal analysts forecast in a Reuters poll and compares with a decline of 59 Bcf in the same week last year and a five-year (2017-2021) average decline of 89 Bcf.

U.S. front-month gas futures rose 10.5 cents, or 2.3%, to settle at $4.631 per MMBtu.

U.S. gas futures remain shielded from record European prices because the United States has all the fuel it needs for domestic use and the country's ability to export more LNG is limited by capacity constraints.

The United States is already producing LNG near full capacity, so no matter how high global gas prices rise, it would not be able to produce much more of the supercooled fuel any time soon.

Since U.S. LNG exports were already near maximum capacity, some analysts said soaring global energy prices would cause American gas prices to decline as U.S. drillers seek more oil supplies. That would boost the amount of associated gas that comes out of the ground with that oil.

Data provider Refinitiv said average gas output in the U.S. Lower 48 states was on track to rise to 93.4 Bcfd in March from 92.5 Bcfd in February as more oil and gas wells return to service after freezing earlier in the year. That compares with a monthly record of 96.2 Bcfd in December.

On a daily basis, gas output was on track to drop to 92.3 Bcfd on Thursday as cold weather in some producing basins reduces output.

Refinitiv projected average U.S. gas demand, including exports, would hold around 112.0 Bcfd this week and next. Those forecasts were higher than Refinitiv's outlook on Wednesday.

The amount of gas flowing to U.S. LNG export plants rose to 12.58 Bcfd so far in March from 12.43 Bcfd in February and a record 12.44 Bcfd in January. The United States has the capacity to turn about 12.5 Bcfd of gas into LNG. The rest of the fuel flowing to the facilities is used to operate the plants.

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