U.S. natgas futures jump 5% on record global prices, drop in U.S. output

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U.S. natural gas futures jumped about 5% to a 10-week high on Tuesday on record global

gas prices, a drop in daily U.S. output, a heat wave in California and forecasts for more hot weather and

higher air conditioning demand in late August than previously expected.

That U.S. price increase came despite the ongoing outage at the Freeport liquefied natural gas (LNG)

export plant in Texas, which has left more gas in the United States for utilities to inject into stockpiles

for next winter.

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Freeport LNG, the second-biggest U.S. LNG export plant, was consuming about 2 billion cubic feet per day

(bcfd) of gas before it was shut on June 8. Freeport expects the plant to return to at least partial service

in early October.

Front-month gas futures rose 41.9 cents, or 4.8%, to $9.147 per million British thermal units

(mmBtu) by 8:33 a.m. EDT (1233 GMT), putting the contract on track for its highest close since settling at

$9.293 on June 7. On June 6, the contract closed at a near 14-year high of $9.322.

In the spot market, power and gas prices for Tuesday in

Southern California and Arizona jumped to their highest since September 2021 as homes and businesses cranked

up their air conditioners to escape a heat wave.

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To ensure the grid has enough resources to meet rising air conditioning demand, California’s power grid

operator told electric companies to delay unnecessary maintenance on their generating plants and power lines

during the hot weather.

So far this year, the gas front-month is up about 144% as higher prices in Europe and Asia keep demand for

U.S. LNG exports strong. Global gas prices have soared this year following supply disruptions linked to

Russia’s invasion of Ukraine on Feb. 24.

Gas was trading at record highs of around $71 per mmBtu in Europe and $56 in Asia.

The United States became the world’s top LNG exporter during the first half of 2022. But no matter how

high global gas prices rise, the United States cannot export more LNG because the country’s plants are already

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operating at full capacity.

Russian gas exports via the three main lines into Germany – Nord Stream 1 (Russia-Germany), Yamal

(Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route – averaged 2.5

bcfd so far in August, down from 2.8 bcfd in July and 10.4 bcfd in August 2021.

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U.S. gas futures lag far behind global prices because the United States is the world’s top producer with

all the fuel it needs for domestic use, while capacity constraints and the Freeport outage prevent the country

from exporting more LNG.

Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 97.4 bcfd so far in

August from a record 96.7 bcfd in July.

On a daily basis, however, output was on track to drop from a record 98.3 bcfd on Aug. 8 to a preliminary

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15-week low of 94.3 bcfd on Tuesday. Preliminary data is often revised later in the day.

With warmer weather expected, Refinitiv projected average U.S. gas demand, including exports, would rise

from 95.3 bcfd this week to 97.5 bcfd next week. The forecast for this week was lower than Refinitiv’s outlook

on Monday, but its forecast for next week was higher.

The average amount of gas flowing to U.S. LNG export plants has held at 10.9 bcfd so far in August, the

same as July. That compares with a monthly record of 12.9 bcfd in March. The seven big U.S. export plants can

turn about 13.8 bcfd of gas into LNG.

Week ended Week ended Year ago Five-year

Aug 12 Aug 5 Aug 12 average

(Forecast) (Actual) Aug 12

U.S. weekly natgas storage change (bcf): +38 +44 +46 +47

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U.S. total natgas in storage (bcf): 2,539 2,501 2,815 2,886

U.S. total storage versus 5-year average -12.0% -11.9%

Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five Year

Last Year Average Average

2021 (2017-2021)

Henry Hub 9.00 8.73 4.03 3.73 2.89

Title Transfer Facility (TTF) 70.64 68.04 15.43 16.04 7.49

Japan Korea Marker (JKM) 56.19 45.39 16.36 18.00 8.95

Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days

Two-Week Total Forecast Current Day Prior Day Prior Year 10-Year 30-Year

Norm Norm

U.S. GFS HDDs 1 1 2 4 6

U.S. GFS CDDs 212 203 207 189 179

U.S. GFS TDDs 213 204 209 193 186

Refinitiv U.S. Weekly GFS Supply and Demand Forecasts

Prior Week Current Week Next Week This Week Five-Year

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Last Year Average For

Month

U.S. Supply (bcfd)

U.S. Lower 48 Dry Production 97.6 96.9 97.7 93.6 86.5

U.S. Imports from Canada 7.9 7.4 8.1 8.1 8.0

U.S. LNG Imports 0.0 0.0 0.0 0.0 0.1

Total U.S. Supply 105.5 104.2 105.7 101.7 94.6

U.S. Demand (bcfd)

U.S. Exports to Canada 2.7 2.6 2.6 2.5 2.5

U.S. Exports to Mexico 5.6 5.7 5.8 6.3 5.4

U.S. LNG Exports 10.9 10.9 10.1 10.8 4.4

U.S. Commercial 4.4 4.5 4.5 4.5 4.5

U.S. Residential 3.5 3.5 3.6 3.5 3.4

U.S. Power Plant 46.4 39.8 42.6 39.5 38.8

U.S. Industrial 21.3 21.3 21.3 21.0 21.2

U.S. Plant Fuel 4.8 4.8 4.8 4.8 4.8

U.S. Pipe Distribution 2.2 2.0 2.1 2.0 2.1

U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1

Total U.S. Consumption 82.8 76.0 79.0 75.4 74.9

Total U.S. Demand 101.9 95.3 97.5 95.0 87.2

U.S. weekly power generation percent by fuel – EIA

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Week ended Week ended Week ended Week ended Week ended

Aug 19 Aug 12 Aug 5 Jul 29 Jul 22

Wind 6 6 8 7 8

Solar 4 3 3 3 3

Hydro 5 5 5 5 6

Other 2 2 2 2 2

Petroleum 0 0 0 0 0

Natural Gas 41 45 42 42 45

Coal 23 22 21 22 22

Nuclear 20 17 17 17 17

SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)

Hub Current Day Prior Day

Henry Hub 8.62 8.73

Transco Z6 New York 7.68 7.40

PG&E Citygate 9.82 10.02

Dominion South 7.33 7.41

Chicago Citygate 8.15 8.23

Algonquin Citygate 7.65 7.55

SoCal Citygate 12.45 10.88

Waha Hub 7.92 8.20

AECO 2.75 2.83

SNL U.S. Power Next-Day Prices ($ per megawatt-hour)

Hub Current Day

New England 77.75 73.50

PJM West 94.25 71.00

Ercot North 195.00 130.50

Mid C 140.00 106.00

Palo Verde 155.00 110.00

SP-15 138.50 111.50

(Reporting by Scott DiSavino; Editing by David Holmes)