September 28, 20218:11 PM BSTLast Updated a day ago
Energy
U.S. natgas rise to 7-year high on record global prices
3 minute read
Snow covered transfer lines leading to storage tanks at the Dominion Cove Point Liquefied Natural Gas (LNG) terminal in Lusby, Maryland, March 18, 2014. REUTERS/Gary Cameron/File Photo
Sept 28 (Reuters) – U.S. natural gas futures climbed more than 2% to a seven-year high on Tuesday as record global gas prices keep demand for U.S. liquefied natural gas (LNG) exports strong.
Traders noted prices were volatile – rising over 10% early in the session for a second day in a row – since volumes were thin with the front-month October contract expiring on Tuesday. They also noted prices rose despite forecasts for milder weather and lower demand than previously expected over the next two weeks.
Gas prices in Europe and Asia traded about four times over U.S. gas due to insatiable demand for the fuel in Asia and low stockpiles in Europe ahead of the winter heating season, when demand peaks.
On the last day as the front month, gas futures for October delivery rose 13.5 cents, or 2.4%, to settle at $5.841 per million British thermal units (mmBtu), the highest close since February 2014 for a second day in a row.
November futures , which will soon be the front-month, were up about 13 cents to $5.85 per mmBtu.
Premiums of futures for November 2021 over October 2021 and March 2022 over April 2022 both rose to record highs this week. The market uses the March-April and October-November spreads to bet on the winter heating season.
The gas industry calls the March-April spread the “widow maker” because rapid price moves resulting from changing weather forecasts have knocked some speculators out of business, including the Amaranth hedge fund, which lost over $6 billion on gas futures in 2006.
With gas prices at record highs near $29 per mmBtu in Europe and Asia versus just around $6 in the United States, traders said buyers around the world would keep purchasing all the LNG the United States could produce. The United States exports about 10% of the gas it produces as LNG.
Despite reductions at several U.S. LNG export plants this month, the amount of gas flowing to the plants has slipped modestly to an average of 10.4 billion cubic feet per day (bcfd) in September from 10.5 bcfd in August, according to data provider Refinitiv. read more
But no matter how high global prices rise, the United States has the capacity to turn only about 10.5 bcfd of gas into LNG. Global markets will likely have to wait until later this year to get more from the United States, when the sixth liquefaction train at Cheniere Energy Inc’s (LNG.A) Sabine Pass and Venture Global LNG’s Calcasieu Pass in Louisiana start producing LNG in test mode.
“The U.S. LNG export capacity ceiling is likely the only thing reining in Henry Hub prices from following European and Asian gas/LNG prices to the moon,” said Sheetal Nasta at RBN Energy, noting: “As explosive as Henry Hub futures are these days, if not for the capacity constraint, they would be much higher.”
With the coming of cooler weather, Refinitiv projected average U.S. gas demand, including exports, would rise from 81.8 bcfd this week to 82.8 bcfd next week as homes and businesses start to crank up their heaters. Those forecasts, however, were lower than Refinitiv projected on Monday.
| Week ended Sep 24 (Forecast) | Week ended Sep 17 (Actual) | Year ago Sep 24 | Five-year average Sep 24 | ||
| U.S. weekly natgas storage change (bcf): | 82 | 76 | 74 | 72 | |
| U.S. total natgas in storage (bcf): | 3,164 | 3,082 | 3,745 | 3,383 | |
| U.S. total storage versus 5-year average | -6.5% | -6.9% | |||
| Global Gas Benchmark Futures ($ per mmBtu) | Current Day | Prior Day | This Month Last Year | Prior Year Average 2020 | Five Year Average (2016-2020) |
| Henry Hub | 5.24 | 5.35 | 2.28 | 2.13 | 2.66 |
| Title Transfer Facility (TTF) | 28.89 | 25.71 | 3.94 | 3.24 | 5.19 |
| Japan Korea Marker (JKM) | 29.20 | 27.50 | 4.63 | 4.22 | 6.49 |
| 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 | 45 | 43 | 61 | 74 | 83 |
| U.S. GFS CDDs | 73 | 77 | 76 | 75 | 68 |
| U.S. GFS TDDs | 118 | 120 | 137 | 151 | 151 |
| 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 | 91.8 | 91.5 | 91.9 | 88.4 | 82.6 |
| U.S. Imports from Canada | 7.2 | 7.3 | 6.9 | 6.6 | 7.6 |
| U.S. LNG Imports | 0.0 | 0.0 | 0.0 | 0.0 | 0.1 |
| Total U.S. Supply | 99.0 | 98.8 | 98.8 | 95.0 | 90.3 |
| U.S. Demand (bcfd) | |||||
| U.S. Exports to Canada | 2.4 | 2.0 | 2.1 | 2.2 | 2.3 |
| U.S. Exports to Mexico | 5.8 | 5.6 | 5.8 | 6.1 | 5.0 |
| U.S. LNG Exports | 9.9 | 10.4 | 10.3 | 6.8 | 3.1 |
| U.S. Commercial | 4.9 | 5.0 | 5.2 | 5.6 | 4.8 |
| U.S. Residential | 4.1 | 4.4 | 4.6 | 5.4 | 3.8 |
| U.S. Power Plant | 31.4 | 27.2 | 27.4 | 30.5 | 32.8 |
| U.S. Industrial | 21.0 | 20.9 | 21.0 | 22.0 | 21.1 |
| U.S. Plant Fuel | 4.5 | 4.5 | 4.5 | 4.5 | 4.4 |
| U.S. Pipe Distribution | 1.8 | 1.7 | 1.7 | 1.7 | 1.9 |
| U.S. Vehicle Fuel | 0.1 | 0.1 | 0.1 | 0.1 | 0.1 |
| Total U.S. Consumption | 67.9 | 63.8 | 64.6 | 69.8 | 68.9 |
| Total U.S. Demand | 86.0 | 81.8 | 82.8 | 84.9 | 79.3 |
| SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu) | |||||
| Hub | Current Day | Prior Day | |||
| Henry Hub | 5.53 | 5.10 | |||
| Transco Z6 New York | 4.40 | 3.95 | |||
| PG&E Citygate | 7.23 | 6.56 | |||
| Dominion South | 4.41 | 3.92 | |||
| Chicago Citygate | 5.03 | 4.48 | |||
| Algonquin Citygate | 4.55 | 4.15 | |||
| SoCal Citygate | 7.02 | 6.01 | |||
| Waha Hub | 5.17 | 4.70 | |||
| SNL U.S. Power Next-Day Prices ($ per megawatt-hour) | |||||
| Hub | Current Day | Prior Day | |||
| New England | 55.50 | 46.00 | |||
| PJM West | 48.50 | 29.50 | |||
| Ercot North | 52.00 | 44.50 | |||
| Mid C | 54.00 | 68.50 | |||
| Palo Verde | 47.50 | 54.00 | |||
| SP-15 | 49.00 | 52.25 |
Reporting by Scott DiSavino; Editing by Steve Orlofsky, Mark Potter and Dan Grebler
Our Standards: The Thomson Reuters Trust Principles.
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