US natural gas futures on track for 12-year high as global prices soar
Soaring global prices push US natural gas futures to 12-year high
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U.S. natural gas futures jumped over 9% and were on track to reach a 12-year high on Tuesday as soaring global prices kept demand for U.S. liquefied natural gas exports strong.
Futures prices in Europe rocketed over 21% for November and 23% for December to fresh record highs on worries several European countries will not have enough gas stored for the coming winter heating season. Prices in Asia also traded near record levels as China and other major LNG buyers compete for available cargoes to meet their insatiable demand for the super-cooled fuel.
In the United States, traders noted that prices were rising despite forecasts for U.S. weather to remain milder than normal through late October, which should keep overall heating and cooling demand lower than usual. Of course, some regions will see lingering air conditioning use, while others will crank up their heaters.
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Front-month gas futures NGc1 rose 52.9 cents, or 9.2%, to $6.295 per million British thermal units (mmBtu) at 1:27 p.m. ET, putting the contract on track for its highest close since December 2008.
Analysts have said stockpiles in some European countries were over 20% below normal for this time of year. In the United States, meanwhile, inventories were expected to reach about 3.5 trillion cubic feet (tcf) by the end of October. Analysts said that should be enough for the U.S. winter heating season even though that amount would fall short of the 3.7 tcf five-year (2016-2020) average for that time of year.
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Belief that the United States will have enough gas in storage for this winter and a lack of capacity to export more LNG has kept U.S. prices from rocketing to the record levels seen in Europe and Asia. However, pipeline constraints and competition for expensive LNG exports were expected to boost prices to multi-year highs in California and New England this winter.
Data provider Refinitiv said gas output in the U.S. Lower 48 states rose to an average of 91.7 billion cubic feet per day (bcfd) so far in October from 91.1 bcfd in September. That compares with a monthly record of 95.4 bcfd in November 2019.
Refinitiv projected U.S. gas demand, including exports, would slide from an average of 85.0 bcfd this week to 83.6 bcfd next week as the weather turns milder. That was the same as Refinitiv's forecast on Monday.
With gas prices at or near record highs of $40 per mmBtu in Europe and $35 in Asia, versus just over $6 in the United States, traders said buyers around the world would keep purchasing all the LNG the United States could produce.
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With Berkshire Hathaway Energy's Cove Point LNG export plant in Maryland expected to remain shut for another week of planned maintenance, Refinitiv said the amount of gas flowing to U.S. LNG export plants slipped to an average of 10.2 bcfd so far in October from 10.4 bcfd in September.
But no matter how high global prices rise, the United States only has the capacity to turn about 10.5 bcfd of gas into LNG. Global markets will have to wait until later this year to get more from the United States when the sixth liquefaction train at Cheniere Energy Inc's LNG.A Sabine Pass and Venture Global LNG's Calcasieu Pass in Louisiana are expected to start producing LNG in test mode.