US natgas prices up 3% to 16-week high on rising LNG feedgas

U.S. natural gas futures climbed about 3% to a 16-week high on Friday with an increase in the amount of feedgas to liquefied natural gas (LNG) export plants with the expected return of Freeport LNG’s export plant in Texas to full service after a brief reduction.

Keeping that price increase in check has been the tremendous surplus of gas in storage. Analysts forecast gas stockpiles were about 29% above normal levels for this time of year.

Front-month gas futures NGc1 for June delivery on the New York Mercantile Exchange rose 7.4 cents, or 3.0%, to $2.569 per million British thermal units (mmBtu) at 9:20 a.m. EDT (1320 GMT), putting the contract on track for its highest close since Jan. 26 for a second day in a row.

That kept the front-month in technically overbought territory for an 11th straight day for the first time since April 2022 and also kept it above the 200-day moving average for a second day in a row.

Since January, the 200-day moving average had acted as a key level of technical resistance – until now.

For the week, the contract was up about 14% after gaining 5% last week and a record 33% two weeks ago.

Along the Gulf Coast, more than 946,000 homes and businesses in Texas, Louisiana and other Gulf Coast states were still without power on Friday morning after killer storms battered the region on Thursday.

SUPPLY AND DEMAND

Financial firm LSEG said gas output in the Lower 48 U.S. states fell to an average of 97.2 billion cubic feet per day (bcfd) so far in May, down from 98.2 bcfd in April. That compares with a monthly record high of 105.5 bcfd in December 2023.

On a daily basis, output was on track to drop by around 1.7 bcfd over the past five days to a preliminary 96.5 bcfd on Friday.

That put U.S. gas production down by about 9% so far in 2024 after several energy firms, including EQT EQT.N and Chesapeake Energy CHK.O, delayed well completions and cut back on other drilling activities after prices fell to 3-1/2-year lows in February and March.

EQT is the biggest U.S. gas producer and Chesapeake is on track to become the biggest producer after its merger with Southwestern Energy SWN.N.

Meteorologists projected weather across the Lower 48 states would remain mostly warmer than normal through June 1.

LSEG forecast gas demand in the Lower 48, including exports, would rise from 92.3 bcfd this week to around 93.0 bcfd over the next two weeks. The forecast for this week was lower than LSEG’s outlook on Thursday.

Gas flows to the seven big U.S. LNG export plants rose from an average of 11.9 bcfd in April to 12.7 bcfd so far in May with the return to full service of Freeport’s 2.1-bcfd plant in Texas. That compares with a monthly record high of 14.7 bcfd in December.

On a daily basis, LNG feedgas was on track to rise from 12.6 bcfd on Thursday to 13.2 bcfd on Friday with flows to Freeport expected to rise to a five-month high of 2.1 bcfd on Friday after a brief one-day reduction to 1.5 bcfd on Thursday.

Energy traders said that brief feedgas reduction at Freeport was likely due to the trip of a liquefaction train. Freeport said Train 2 experienced a trip on Thursday due to a compressor issue, according to a report the company filed with Texas environmental regulators.
Source: Reuters (Reporting by Scott DiSavino)