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US natgas holds near 9-week high on low wind power, Canada wildfires

U.S. natural gas futures held near a nine-week high on Friday after a technical bounce in the prior session and as a lack of wind power this week caused generators to burn more gas to produce electricity.

Traders also said prices were supported this week by a drop in gas exports from Canada due to wildfires in Alberta and other western provinces.

The amount of U.S. power generated by wind this week was on track to drop to just 7% of the total versus a recent high of 17% during the week ended April 21, according to federal energy data.

That means power generators had to burn more gas to produce electricity, and there will be less of the fuel available to go into storage.

The amount of power generated by gas was on track to hit 43% this week, up from a recent low of just 37% during the windy week ended April 21.

Front-month gas futures NGc1 for June delivery on the New York Mercantile Exchange fell 0.7 cents, or 0.3%, to settle at $2.585 per million British thermal units (mmBtu). On Thursday, the contract jumped about 10% to settle at its highest since March 13.

In intraday trade on Friday, the front-month rose over its 100-day moving average for the first time since late November, but failed to remain above that level at the close. The contract has not closed above the 100-day moving average, a key level of technical resistance, since September 2022.

The front-month also remained in technically overbought territory with a relative strength index (RSI) of more than 70 for a second day in a row for the first time since July 2022.

For the week, the contract gained about 14% this week after rising about 6% last week. That was its biggest weekly percentage increase since early March when it soared about 23%.

Over the past couple of weeks the average amount of gas flowing from Canada to the U.S. averaged just 7.1 billion cubic feet per day (bcfd) as wildfires in Alberta and other western provinces caused some producers to shut oil and gas output, according to data provider Refinitiv.

That is well below the 8.4-bcfd average amount of gas exported from Canada to the U.S. since the start of the year and 2022’s average of 9.0 bcfd. About 8% of the gas consumed in or exported from the U.S. comes from Canada.

On a daily basis, Canadian gas exports were on track to reach 7.3 bcfd on Friday, up from a 25-month low of 6.4 bcfd on Wednesday.

In the U.S., meanwhile, Refinitiv said average gas output in the Lower 48 states held at 101.4 bcfd so far in May, matching April’s monthly record.

Meteorologists projected the weather in the U.S. Lower 48 states would remain mostly near normal through June 3.

Refinitiv forecast U.S. gas demand, including exports, would slide from 93.0 bcfd this week to 89.4 bcfd next week before rising to 90.7 bcfd in two weeks. The forecasts for this week and next were similar to Refinitiv’s outlook on Thursday.

Gas flows to the seven big U.S. LNG export plants fell from a record 14.0 bcfd in April to an average of 12.9 bcfd so far in May due to maintenance work at several plants, including Cameron LNG in Louisiana and Cheniere Energy Inc’s LNG.A Sabine Pass in Louisiana.
Source: Reuters (Reporting by Scott DiSavino; Editing by Jan Harvey and Marguerita Choy)

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