US natgas prices edge up to 3-week high on lower output, higher demand

By Scott DiSavino

U.S. natural gas futures edged up about 1% to a three-week high on Monday on a drop in output in recent weeks and forecasts for more demand this week than previously expected.

Gas futures NG1! for June delivery on the New York Mercantile Exchange rose 2.7 cents, or 0.7%, to $3.657 per million British thermal units, putting the contract on track for its highest close since April 9 for a second day in a row.

Looking forward, the premium of futures for July over June (NGM25-N25) rose to a record 33 cents per mmBtu.

Even though gas futures jumped about 24% last week, speculators cut their net long futures and options positions on the New York Mercantile and Intercontinental exchanges for an eighth week in a row to the lowest since January, according to the U.S. Commodity Futures Trading Commission's Commitments of Traders report.

Analysts said mild weather expected to last through late-May should keep heating and cooling demand low, allowing utilities to continue injecting more gas into storage than normal for this time of year.

Gas stockpiles were around 1% above the five-year normal.

Gas stockpiles had been below normal from mid-January through late April after utilities pulled a monthly record 1.013 billion cubic feet of gas from storage in January to keep homes and businesses warm during extreme cold weather this winter.

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

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 U.S. states fell to 103.7 billion cubic feet per day so far in May, down from a monthly record of 105.8 bcfd in April.

Since gas output hit a daily record high of 17.4 bcfd on April 18, production was on track to drop by around 3.9 bcfd to a preliminary 10-week low of 103.5 bcfd on Monday.

That, however, was a smaller daily decline than LSEG forecast on Friday. Analysts have noted that preliminary data is often revised later in the day.

Meteorologists projected temperatures in the Lower 48 states would remain mostly warmer than normal through May 20.

LSEG forecast average gas demand in the Lower 48, including exports, will slide from 96.9 bcfd this week to 95.0 bcfd next week. The forecast for this week was higher than LSEG's outlook on Friday, while its forecast for next week was lower.

The average amount of gas flowing to the eight big liquefied natural gas export plants operating in the U.S. fell to 15.4 bcfd so far in May, down from a monthly record of 16.0 bcfd in April.

On a daily basis, LNG feedgas was on track to drop to a preliminary six-week low of 14.8 bcfd on Monday due mostly to a drop in flows to Cameron LNG's 2.0-bcfd plant in Louisiana to 1.0 bcfd on Monday, down from 1.4 bcfd on Sunday and an average of 1.8 bcfd over the prior seven days.

Officials at Cameron LNG were not immediately available for comment on the feedgas reduction. The company, however, has told customers that it will conduct maintenance on a pipeline that supplies gas to the plant, which will reduce flows on the pipe this week.

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 around $11 per mmBtu at both the Dutch Title Transfer Facility (TRNLTTFMc1) benchmark in Europe and the Japan Korea Marker (JKMc1) benchmark in Asia.