US natgas prices jump 5% to 2-week high on output drop, despite big storage build

U.S. natural gas futures jumped about 5% to a two-week high on Thursday on a drop in output over the past few days and forecasts for more demand next week than previously expected.

Prices increased despite a federal report, which was delayed due to a software problem, showing last week's storage build was, as expected, much bigger than usual for this time of year. The build returned the amount of gas in stockpiles to normal levels for the first time since January.

Gas futures NG1! for June delivery on the New York Mercantile Exchange rose 15.3 cents, or 4.6%, to settle at $3.479 per million British thermal units, their highest close since April 11.

The U.S. Energy Information Administration (EIA) said energy firms added 107 billion cubic feet of gas into storage during the week ended April 25.

That was in line with the 107-bcf build analysts forecast in a Reuters poll, and compares with an increase of 64 bcf during the same week last year and a five-year average build of 58 bcf for this time of year.

The build boosted the amount of gas in storage to near normal levels for this time of year. Gas stockpiles had been below normal since mid-January as utilities pulled a record 1.013 bcf of gas from storage to keep homes and businesses warm during extreme cold weather this winter.

Some analysts said mild weather and record output so far this spring could allow energy firms to add record amounts of gas into storage in May, breaking the all-time monthly injection high of 494 bcf set in May 2015.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 U.S. states rose to a record 105.8 billion cubic feet per day in April, up from the prior monthly all-time high of 105.6 bcfd in March.

On a daily basis, however, gas output was on track to drop by 3.5 bcfd over the past four days to a preliminary two-month low of 102.0 bcfd on Thursday. Analysts have noted that preliminary data - especially for the first day of the month - is often revised later in the day.

Meteorologists projected temperatures in the Lower 48 states would remain mostly warmer than normal through May 16.

LSEG forecast average gas demand in the Lower 48, including exports, will slide from 98.5 bcfd this week to 95.8 bcfd next week. The forecast for this week was lower than LSEG's outlook on Wednesday, while its forecast for next week was higher.

The average amount of gas flowing to the eight big liquefied natural gas export plants operating in the U.S. climbed to a record 16.0 bcfd in April, up from the prior monthly all-time high of 15.8 bcfd in March, on rising flows to Venture Global's VG 3.2-bcfd Plaquemines export plant under construction in Louisiana.

The U.S. became the world's biggest LNG supplier in 2023, surpassing Australia and Qatar, as surging global prices fed demand for more exports, due in part to supply disruptions and sanctions linked to Russia's 2022 invasion of Ukraine.

Gas was trading at a nine-month low of around $11 per mmBtu at the Dutch Title Transfer Facility (TTF) (TRNLTTFMc1) benchmark in Europe and near an 11-month low of around $11 at the Japan Korea Marker (JKM) (JKMc1) benchmark in Asia.