Update: U.S. natgas prices climbed about 3% to a 21-week high on lower output, higher demand

(Reuters)U.S. natural gas futures climbed by about 3% to a 21-week high on Friday on recent declines in daily output and forecasts that power generators will burn a lot more gas in late June to meet rising electric use as homes and businesses crank up their air conditioners to escape an expected heat wave.

Traders said that price increases would likely have been much higher but for lower spot prices and the tremendous oversupply of gas still in storage. Analysts said current gas stockpiles were around 24% above normal levels for this time of year.

"Spotty production during the first week of June helped natural gas power through weak spot pricing," analysts at energy consulting firm EBW said in a note.

Front-month gas futures for July delivery on the New York Mercantile Exchange rose 9.7 cents, or 3.4%, to settle at $2.918 per million British thermal units (MMBtu), their highest close since Jan. 12.

For the week, the front-month was up about 13% after gaining about 3% last week.

One factor that has helped to keep a lid on futures prices so far this year has been lower spot or next-day prices at the Henry Hub benchmark in Louisiana.

The spot market has traded below front-month futures for 93 out of 109 trading days so far this year, according to data from financial firm LSEG. Next-day prices at the Henry Hub were up about 1% to $2.30 per mmBtu for Friday.

Supply and demand. Financial firm LSEG said gas output in the Lower 48 U.S. states slipped to an average of 98.0 Bft3d so far in June, down from 98.1 Bft3d in May. That compares with a monthly record of 105.5 Bft3d in December 2023.

On a daily basis, however, output was on track to drop by about 2.1 Bft3d over the past four days to a preliminary four-week low of 96.9 Bft3d on Friday. That output, however, was up about 0.3 Bft3d from a 15-week low of 96.5 Bft3d on May 1.

Analysts said the increase since May 1 was a sign output was rising due to a 47% jump in futures prices in April and May. Output hit a six-week high of 99.5 Bft3d on May 24.

Overall, U.S. gas production is still down around 9% so far in 2024 after several energy firms, including EQT and Chesapeake Energy, delayed well completions and cut drilling activities when prices fell in February and March.

EQT is the biggest U.S. gas producer and Chesapeake is on track to become the biggest producer after its merger with Southwestern Energy.

Meteorologists projected weather across the Lower 48 states would remain mostly warmer than normal through June 22 except for some near- to below-normal days from June 9-12.

LSEG forecast gas demand in the Lower 48, including exports, would ease from 94.0 Bft3d this week to 93.3 Bft3d with cooler weather next week before rising to 99.2 Bft3d in two weeks when the weather turns hot. The forecast for this week were higher than LSEG's outlook on Thursday.

Gas flows to the seven big U.S. LNG export plants have risen to 13.3 Bft3d so far in June, up from 12.9 Bft3d in May.

That, however, remains well below the monthly record high of 14.7 Bft3d in December 2023 due to ongoing maintenance at several plants, including Cheniere Energy's Sabine Pass and Venture Global's Calcasieu Pass in Louisiana.


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