HomeNewsU.S. natgas prices jump 5% on higher demand forecast, lower output

U.S. natgas prices jump 5% on higher demand forecast, lower output

5/2/2024

(Reuters)—U.S. natural gas futures jumped about 5% on Thursday on a continued drop in output and more demand next week than previously expected is forecasted due to an increase in the amount of gas flowing to liquefied natural gas (LNG) export plants.

The price rise came even though last week's storage build was slightly bigger than analysts expected. The U.S. Energy Information Administration (EIA) said utilities added 59 Bft3 of gas into storage during the week ended April 26.

That was more than the 55-Bft3 build analysts forecast in a Reuters poll and compares with an increase of 62 Bft3 in the same week last year and a 5-yr (2019–2023) average rise of 72 Bft3 for this time of year.

That leaves gas stockpiles about 35% above normal levels for this time of year.

U.S. gas production has dropped by around 10% so far in 2024 after several energy firms, including EQT and Chesapeake Energy, delayed well completions and cut back on other drilling activities after prices fell to 3.5-yr lows in February and March.

Financial firm LSEG said gas output in the Lower 48 U.S. states fell to an average of 95.7 Bft3d so far in May, down from 98.1 Bft3d in April. That compares with a monthly record of 105.5 Bft3d in December 2023.

On a daily basis, output was on track to drop by 2.1 Bft3d over the past eight days to a preliminary 15-wk low of 95.6 Bft3d on Thursday. Meteorologists projected weather across the Lower 48 states would remain mostly warmer than normal through May 10 before turning to near-normal levels in the May 11–17 period.

LSEG forecast gas demand in the Lower 48, including exports, would rise from 91.6 Bft3d this week to 92.5 Bft3d next week. The forecast for next week was higher than LSEG's outlook on Wednesday.

Gas flows to the seven big U.S. LNG export plants rose from an average of 11.9 Bft3d in April to 12.2 Bft3d so far in May with the slow return to service of Freeport LNG’s plant in Texas. That compares with a monthly record of 14.7 Bft3d in December.

The U.S. became the world's biggest LNG supplier in 2023, ahead of recent leaders Australia and Qatar, as much higher global prices fed demand for more exports due in part to supply disruptions and sanctions linked to Russia's war in Ukraine.

 

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