U.S. natgas soars over 7% on forecasts for higher demand

U.S. natural gas futures jumped more than 7% in holiday-thinned trading on Friday, registering their best week in nearly two months, supported by forecasts for slightly higher heating demand than previously expected.

On its last day as the front-month, gas futures NGc1 for December delivery rose 37.9 cents or 7.5% to settle at $5.447 per million British thermal units (mmBtu).

For the week, the contract is up 7.5% after gaining about 5.8% last week.

“With colder weather coming up, traders are out there saying ‘Okay, we can buy,'” Robert DiDona of Energy Ventures Analysis said.

“The market has largely been bouncing back and forth in a small range, and then we finally got some short covering on a thin day.”

Data provider Refinitiv projected average U.S. gas demand, including exports, would rise from 112.0 bcfd this week to 112.8 bcfd next week as the weather turns seasonally colder and homes and businesses crank up their heaters.

“This market has been able to shrug off today’s broad-based cut in risk appetite since it is primarily a weather market,” advisory firm Ritterbusch and Associates said in a note.

In recent months, global gas prices hit record highs as utilities around the world scrambled for Liquefied Natural Gas (LNG) cargoes to replenish extremely low stockpiles in Europe and meet insatiable demand in Asia, where energy shortfalls have caused power blackouts in China.

Following those global gas prices, U.S. futures jumped to a 12-year high in early October, but have since pulled back because the United States has plenty of gas in storage and ample production for the winter. Overseas prices continue to trade about six times higher than U.S. futures.

With gas prices around $30 per mmBtu in Europe TRNLTTFMc1 and $36 in Asia JKMc1, compared with about $5 in the United States, traders said buyers around the world will keep purchasing all the LNG the United States can produce.

The amount of gas flowing to U.S. LNG export plants averaged 11.3 bcfd so far in November, up from 10.5 bcfd in October as the sixth train at Cheniere Energy Inc’s LNG.A Sabine Pass plant in Louisiana started producing LNG. That compares with a monthly record of 11.5 bcfd in April.

Meanwhile, data provider Refinitiv said output in the U.S. Lower 48 states averaged 96.3 billion cubic feet per day (bcfd) so far in November, up from 94.1 bcfd in October and a monthly record of 95.4 bcfd in November 2019.
Source: (Reporting by Bharat Govind Gautam in Bengaluru and Scott DiSavino; additional reporting by Brijesh Patel;Editing by Elaine Hardcastle)