U.S. natgas gains 4% on expectations LNG exports will rise

Credit: REUTERS/DADO RUVIC

By Scott DiSavino

Oct 24 (Reuters) - U.S. natural gas futures rose about 4% from a seven-month low in the prior session on expectations demand would rise as liquefied natural gas (LNG) exports increase due to plants exiting maintenance outages over the next few weeks.

That price increase came despite record output and forecasts for the weather to remain milder than normal through at least early November.

Gas futures dropped almost 60% over the past nine weeks - a move that could help cut U.S. consumer heating costs this winter - due to a combination of mild weather, record output and low LNG exports that allowed utilities to inject lots of gas into storage. EIA/GASNGAS/POLL

Major LNG outages include Berkshire Hathaway Energy's shutdown on Oct. 1 of its 0.8 billion-cubic-feet-per-day (bcfd) Cove Point LNG export plant in Maryland for about three weeks of planned maintenance and the shutdown of Freeport LNG's 2.0-bcfd plant in Texas for unplanned work after an explosion on June 8. Freeport expects the facility to return to at least partial service in early to mid-November.

At least four vessels were heading to Freeport, according to Refinitiv data, including Prism Brilliance (currently located off the coast from the plant), Prism Diversity (expected to arrive Oct. 29), Prism Courage (Nov. 1) and Seapeak Methane (Nov. 22). Some traders expect Freeport will return to service in November while others believe the return will be delayed. Officials at Freeport have said the plant remains on track to return in November.

Front-month gas futures NGc1 rose 17.3 cents, or 3.5%, to $5.132 per million British thermal units (mmBtu) at 9:57 a.m. ET (1357 GMT). On Friday, the contract closed at its lowest level since March 21.

Despite the price increase, the front-month remained in technically oversold territory with a relative strength index (RSI) below 30 for a sixth day for the first time since January 2020.

Despite weeks of losses, U.S. gas futures were still up about 37% so far this year as soaring global gas prices feed demand for U.S. exports due to supply disruptions and sanctions linked to Russia's Feb. 24 invasion of Ukraine.

Gas was trading at $28 per mmBtu in Europe TRNLTTFMc1 and $32 in Asia JKMc1.

That put European forwards down about 15% for the day and on track to for their lowest close since June 13 as mild weather and strong LNG imports allowed utilities to boost the amount of gas in storage in Northwest Europe to healthy levels over 90% of capacity. The contract settled at a record high of $90.91 on Aug. 25. NG/EU

During the first nine months of 2022, roughly 60%, or 6.3 bcfd, of U.S. LNG exports went to Europe, as shippers diverted cargoes from Asia to fetch higher prices. Last year, just 29%, or about 2.8 bcfd, of U.S. LNG exports went to Europe.

Russian gas exports via the three main lines into Germany - Nord Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route - averaged just 1.3 bcfd so far in October, the same as September but well below 9.2 bcfd seen in October 2021.

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U.S. gas futures lag far behind global prices because the United States is the world's top producer with all the fuel it needs for domestic use, while capacity constraints and the Freeport outage prevent the country from exporting more LNG.

Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 99.5 bcfd so far in October, up from a monthly record of 99.4 bcfd in September.

With the coming of seasonally cooler weather, Refinitiv projected average U.S. gas demand, including exports, would rise from 93.9 bcfd this week to 97.1 bcfd next week. The forecast for this week was lower than Refinitiv's outlook on Friday.

Week ended Oct 21 (Forecast)

Week ended Oct 14 (Actual)

Year ago Oct 21

Five-year average Oct 21

U.S. weekly natgas storage change (bcf):

+62

+111

+88

+66

U.S. total natgas in storage (bcf):

3,404

3,342

3,536

3,591

U.S. total storage versus 5-year average

-5.2%

-5.2%

Global Gas Benchmark Futures ($ per mmBtu)

Current Day

Prior Day

This Month Last Year

Prior Year Average 2021

Five Year Average (2017-2021)

Henry Hub NGc1

4.81

4.96

5.57

3.73

2.89

Title Transfer Facility (TTF) TRNLTTFMc1

28.20

33.20

30.84

16.04

7.49

Japan Korea Marker (JKM) JKMc1

32.47

32.35

33.22

18.00

8.95

Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days

Two-Week Total Forecast

Current Day

Prior Day

Prior Year

10-Year Norm

30-Year Norm

U.S. GFS HDDs

157

123

192

190

198

U.S. GFS CDDs

19

26

19

28

24

U.S. GFS TDDs

176

149

211

218

222

Refinitiv U.S. Weekly GFS Supply and Demand Forecasts

Prior Week

Current Week

Next Week

This Week Last Year

Five-Year Average For Month

U.S. Supply (bcfd)

U.S. Lower 48 Dry Production

98.8

99.2

99.6

95.6

87.0

U.S. Imports from Canada

7.8

7.9

7.9

8.1

7.7

U.S. LNG Imports

0.0

0.0

0.0

0.0

0.1

Total U.S. Supply

106.6

107.0

107.5

103.7

94.8

U.S. Demand (bcfd)

U.S. Exports to Canada

2.2

2.5

2.4

1.9

2.4

U.S. Exports to Mexico

5.9

5.6

5.7

6.3

5.3

U.S. LNG Exports

11.5

11.2

10.8

10.9

5.6

U.S. Commercial

8.2

7.3

8.0

7.6

6.8

U.S. Residential

10.6

8.9

10.3

9.5

7.3

U.S. Power Plant

31.1

28.9

30.0

27.3

29.0

U.S. Industrial

23.4

22.4

22.7

21.9

21.8

U.S. Plant Fuel

4.9

4.9

4.9

4.9

4.9

U.S. Pipe Distribution

2.1

2.0

2.1

2.0

1.9

U.S. Vehicle Fuel

0.1

0.1

0.1

0.1

0.1

Total U.S. Consumption

80.4

74.4

78.2

73.3

71.8

Total U.S. Demand

100.0

93.7

97.1

92.4

85.1

U.S. weekly power generation percent by fuel - EIA

Week ended Oct 28

Week ended Oct 21

Week ended Oct 14

Week ended Oct 7

Week ended Sep 30

Wind

16

11

11

9

10

Solar

3

3

4

4

3

Hydro

5

5

5

6

5

Other

3

3

3

2

2

Petroleum

Natural Gas

35

39

41

41

41

Coal

16

19

18

18

19

Nuclear

21

19

19

21

19

SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)

Hub

Current Day

Prior Day

Henry Hub NG-W-HH-SNL

4.45

5.10

Transco Z6 New York NG-CG-NY-SNL

3.29

4.37

PG&E Citygate NG-CG-PGE-SNL

6.70

6.85

Dominion South NG-PCN-APP-SNL

3.45

4.35

Chicago Citygate NG-CG-CH-SNL

3.92

4.68

Algonquin Citygate NG-CG-BS-SNL

3.80

4.57

SoCal Citygate NG-SCL-CGT-SNL

4.12

5.65

Waha Hub NG-WAH-WTX-SNL

2.93

3.79

AECO NG-ASH-ALB-SNL

1.40

1.39

SNL U.S. Power Next-Day Prices ($ per megawatt-hour)

Hub

Current Day

Prior Day

New England EL-PK-NPMS-SNL

43.75

45.50

PJM West EL-PK-PJMW-SNL

49.00

65.50

Ercot North EL-PK-ERTN-SNL

36.00

39.00

Mid C EL-PK-MIDC-SNL

71.50

60.50

Palo Verde EL-PK-PLVD-SNL

57.25

63.25

SP-15 EL-PK-SP15-SNL

54.25

61.00

(Reporting by Scott DiSavino; Editing by Kirsten Donovan and Lisa Shumaker)

((scott.disavino@thomsonreuters.com; +1 332 219 1922; Reuters Messaging: scott.disavino.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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