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U.S. natgas futures jump to 8-month high on rising LNG exports, hot weather

U.S. natural gas futures jumped to an eight-month high on Tuesday on rising liquefied natural gas (LNG) exports, a decline in output and forecasts for warmer weather and higher air conditioning demand over the next two weeks than previously expected.

Front-month gas futures rose 9.9 cents, or 4.2%, to $2.438 per million British thermal units at 8:56 a.m. EDT (1256 GMT), putting the contract on track for its highest close since Dec. 5.

Power prices in the U.S. West, meanwhile, soared to record highs for a second day during a brutal heat wave as California utilities urged consumers to keep conserving energy to avoid more rotating outages with demand expected to hit an all-time high on Tuesday.

Although U.S. and European gas contracts mostly trade on their own fundamentals, a 59% jump in prices at the European Title Transfer Facility (TTF) benchmark in the Netherlands so far in\August helped pull U.S. gas up about 36% this month. That made it profitable for more U.S. LNG cargoes to go to Europe.

U.S. LNG exports were on track to rise in August for the first time in six months. Pipeline gas flowing to the plants climbed to a three-month high of 4.4 billion cubic feet per day (bcfd) so far this month from a 21-month low of 3.3 bcfd in July.

With temperatures expected to moderate now that the hottest days of summer are past, Refinitiv projected U.S. demand, including exports, will decline from an average of 89.9 bcfd this week to 88.8 bcfd next week. That is higher than Refinitiv’s forecast on Monday.

On a daily basis output is on track to fall to 87.2 bcfd on Tuesday, its lowest in a month, according to preliminary data from Refinitiv that is subject to change later in the day.
Source: Reuters (Reporting by Scott DiSavino; Editing by Andrea Ricci)

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