U.S. natural gas futures jump 5% on low wind power forecasts, soaring global prices

(Reuters) - U.S. natural gas futures soared 5% on Monday on forecasts for low wind power, warmer weather and higher air conditioning demand over the next two weeks than previously expected, rising exports to Mexico and a jump in global gas prices.

The amount of U.S. power generated by wind so far this week dropped to just 6% of the total versus a recent high of 12% during the week ended May 12, according to federal energy data. The amount of power generated by gas has risen to 44% so far this week, up from around 40% in recent weeks.

When power generators burn more gas to produce electricity to meet rising air conditioning use, there is less of the fuel available to go into storage for the peak winter heating season. That helps boost prices.

That U.S. price increase occurred despite near record output and a drop in the amount of gas flowing to liquefied natural gas (LNG) export plants due to maintenance.

Front-month gas futures for July delivery on the New York Mercantile Exchange were up 11 cents, or 5.1%, to $2.282 per million British thermal units (mmBtu) at 9:19 a.m. EDT (1319 GMT).

Even though gas prices rose about 3% last week, speculators cut their net long futures and options positions on the New York Mercantile and Intercontinental Exchanges for the first time in three weeks, according to the U.S. Commodity Futures Trading Commission's Commitments of Traders report.

In the spot market, low demand due to mild weather cut next-day gas prices for Monday at the U.S. Henry Hub benchmark in Louisiana to $1.74 per mmBtu, their lowest price since October 2020 for a second day in a row.

In Northern California, next-day gas at the PG&E Citygate <NG-CG-PGE-SNL> fell to $2.51 per mmBtu, its lowest since July 2020.

Around the world, meanwhile, gas prices soared over 20% at the Dutch Title Transfer Facility (TTF) benchmark in Europe to almost $9 per mmBtu, on low LNG sendout and outages.

So far this year, gas prices at TTF and the Japan Korea Marker benchmark in Asia have collapsed more than 60%. On Friday, gas at TTF was trading at a 25-month low of around $7 per mmBtu, while JKM held near a 24-month low near $9.

Supply and demand

Data provider Refinitiv said average gas output in the U.S. Lower 48 states has eased to 102.4 billion cubic feet per day (bcfd) so far in June, down from a monthly record of 102.5 bcfd in May.

Meteorologists projected the weather in the Lower 48 states would remain mostly near through June 13 before turning hotter than normal from June 14-20.

Refinitiv forecast U.S. gas demand, including exports, would ease from 95.9 bcfd this week to 95.3 bcfd next week on expectations wind power will remain low this week. Those demand forecasts were higher than Refinitiv's outlook on Friday.

U.S. exports to Mexico have risen to 7.4 bcfd so far in June, up from 6.0 bcfd in May. That compares with a monthly record high of 6.7 bcfd in June 2021.

Gas flows to the seven big U.S. LNG export plants have slid to 12.1 bcfd so far in June from 13.0 bcfd in May. That was well below the monthly record of 14.0 bcfd in April due to maintenance at several facilities, including Cheniere Energy Inc's Sabine Pass in Louisiana.

Record flows in April were higher than the 13.8 bcfd of gas the seven big plants can turn into LNG since the facilities also use some of the fuel to power equipment used to produce LNG.

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