U.S. natgas futures slide near 2% with decline in global oil/gas prices

U.S. natural gas futures slid about 2% on Thursday as the U.S. market continued its three-day streak of following sharp moves in European gas and global oil prices with the Russia-Ukraine conflict stoking energy supply concerns. The European market took a break on Thursday, falling as much as 8% earlier in the session, after soaring over 100% since Russia invaded Ukraine on Feb. 24.  

Gas futures at the Dutch Title Transfer Facility (TTF) were currently down about 2%. In recent months, the U.S. gas market has mostly shrugged off what was happening in Europe, focusing more on domestic weather and supply and demand. Since the start of 2022, gas prices in the U.S. have moved in the opposite direction of Europe more than half the time. That is different than during the fourth quarter of 2021 when U.S. futures followed European prices about two-thirds of the time.

However, it has been hard for the U.S. market to ignore the massive gains in global oil and gas prices in recent days - especially since those higher gas prices will keep demand for U.S. LNG exports strong for months. No matter how high global gas prices rise, however, the U.S., the world's biggest gas producer, cannot make much more LNG since it is already producing the supercooled fuel at near full capacity.

So, the U.S. worked with other countries, before the Russian invasion, to ensure that gas supplies, mostly from LNG, would keep flowing to Europe. Russia, the world's second-biggest gas producer, usually provides around 30% to 40% of Europe's gas, which totaled about 16.3 Bft³/d in 2021. Thursday's U.S. price decline came despite an expected bigger-than-usual storage withdrawal last week when colder-than-normal weather boosted heating demand.

The U.S. Energy Information Administration (EIA) said utilities pulled 139 Bft³ of gas from storage during the week ended Feb. 25. That was in line with the 138 Bft³ withdrawal analysts forecast in a Reuters poll and compares with a decline of 132 Bft³ in the same week last year and a five-year (2017-2021) average decline of 98 Bft³. Last week's withdrawal cut stockpiles to 1.643 Tft³, or 13.4% below the five-year average of 1.898 Tft³ for this time of the year.  

Front-month gas futures fell 8.4 cents, or 1.8%, to $4.678/MMBtu at 10:44 a.m. EST. On Wednesday, the contract closed at its highest since Feb. 3. U.S. oil prices, meanwhile, soared to their highest since 2008 on Thursday on Russian supply concerns before turning negative on rumors that a nuclear deal with Iran was close, which would allow Iran to export more oil.  

Data provider Refinitiv said average gas output in the U.S. lower 48 states was on track to rise to 93.1 Bft³/d in March from 92.5 Bft³/d in February as more oil and gas wells return to service after freezing earlier in the year. That compares with a monthly record of 96.2 Bft³/d in December.

Reporting by Scott DiSavino; Editing by Jonathan Oatis and Andrea Ricci

 

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