U.S. Natural Gas Prices Rise 2% on Lower Output, Record LNG Export Flows
U.S. natural gas prices rose 2% as domestic output eased and LNG export volumes neared record highs, underscoring strong global demand and solid midstream throughput despite mild autumn weather.
(Reuters) — U.S. natural gas futures climbed about 2% on Friday on a decline in output so far this month and near-record amounts of gas flows to liquefied natural gas (LNG) export plants.
Front-month gas futures for November delivery on the New York Mercantile Exchange rose 7.0 cents, or 2.4%, to settle at $3.008 per million British thermal units (MMBtu). On Oct. 16, the contract closed at its lowest level since Sept. 26 for a third day in a row.
Despite the daily gain, the front-month declined about 3% this week after dropping about 7% last week.
In the tropics, the U.S. National Hurricane Center projected a tropical wave in the central Atlantic Ocean had a 30% chance of strengthening into a tropical cyclone as it moves into the Caribbean Sea over the next week. The system is not expected to reach the U.S. mainland during that time.
Even though storms can boost U.S. gas prices by cutting output along the U.S. Gulf Coast, they are more likely to reduce prices by shutting LNG export plants and knocking out power to homes and businesses. About 40% of the power generated in the U.S. comes from gas-fired plants.
Supply and Demand
LSEG said average gas output in the Lower 48 states fell to 106.6 billion cubic feet per day so far in October, down from 107.4 Bcf/d in September and a record monthly high of 108.0 Bcf/d in August.
Record output earlier this year allowed energy companies to inject more gas into storage than usual. There is currently about 4% more gas in storage than normal for this time of year.
Meteorologists forecast the weather will remain mostly warmer than normal through November 1.
That late-season warmth should reduce gas demand by cutting the amount of fuel used to heat homes and businesses by more than it boosts the amount of fuel that power generators burn to keep air conditioners humming. About 40% of the power produced in the U.S. comes from burning gas.
LSEG projected average gas demand in the Lower 48 states, including exports, would rise from 100.1 Bcf/d this week to 100.6 Bcf/d next week and 103.0 Bcf/d in two weeks. The forecast for next week was lower than LSEG's outlook on Thursday.
The average amount of gas flowing to the eight big U.S. LNG export plants rose to 16.4 Bcf/d so far in October, up from 15.7 Bcf/d in September and a monthly record high of 16.0 Bcf/d in April.
The U.S. became the world's biggest LNG producer 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 benchmark in Europe and the Japan Korea Marker benchmark in Asia.