US natgas prices jump 7% to 3-week high on lower output, higher demand

By Scott DiSavino

U.S. natural gas futures jumped about 7% to a three-week high on Monday on a drop in output and forecasts for warmer weather and higher demand this week than previously expected.

Analysts said gas prices also gained some support from a 3% increase in U.S. oil futures CL1! after OPEC+ kept its output increase unchanged.

Gas futures NG1! for July delivery on the New York Mercantile Exchange rose 24.7 cents, or 7.2%, to settle at $3.694 per million British thermal units, their highest close since May 9.

Even though gas futures rose 3% last week, speculators cut their net long futures and options positions on the New York Mercantile and Intercontinental exchanges for a second week in a row to their lowest since December 2024, the U.S. Commodity Futures Trading Commission's Commitments of Traders report showed.

Analysts, meanwhile, forecast gas stockpiles - already about 4% above the five-year (2020-2024) average - rose by more than usual for a seventh week in a row during the week ended May 30.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 U.S. states fell to 104.0 billion cubic feet per day so far in June, down 105.1 bcfd in May and a monthly record high of 105.8 bcfd in April. Analysts noted output data from early in the month was often revised.

Energy traders said output reductions over the past month or so were primarily due to normal spring maintenance on gas pipelines. Energy firms usually work on gas pipes and other equipment in the spring and autumn when demand for the fuel for heating and cooling is low.

But, some analysts also noted that several energy firms have cut spending on oil drilling due to a 13% decline in oil prices CL1! so far this year. That drop in oil drilling also reduces the amount of gas pulled out of the ground that is associated with that oil production.

About 37% of U.S. gas production comes from associated gas, according to federal energy data.

Meteorologists projected weather across the Lower 48 states would remain mostly warmer than normal through June 17.

LSEG forecast average gas demand in the Lower 48, including exports, will rise from 97.4 bcfd this week to 99.9 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 LNG export plants operating in the U.S. fell to 14.1 bcfd so far in June, down from 15.0 bcfd in May and a monthly record high of 16.0 bcfd in April.

Energy traders said LNG feedgas reductions over the past month or so was primarily due to normal spring maintenance, including about three-weeks of planned work at Cheniere Energy's LNG 4.5-bcfd Sabine Pass plant in Louisiana from around May 31-June 22.

Gas flows to Sabine have held at a 23-month low of around 3.1 bcfd since May 31. That compares with an average of 4.3 bcfd over the prior seven days.

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 $12 per mmBtu at both the Dutch Title Transfer Facility (TRNLTTFMc1) benchmark in Europe and the Japan Korea Marker (JKMc1) benchmark in Asia.