Jan 3 – U.S. natural gas futures started the new year down over 2% on Monday on forecasts for less demand next week than previously expected and a drop in global gas prices from record highs.
Source: Reuters
In the last quarter of 2021, U.S. gas futures have followed the rise and fall of global prices about two-thirds of the time as utilities around the world scramble to buy liquefied natural gas (LNG) cargoes from the United States and elsewhere to replenish low stockpiles in Europe and meet surging demand in Asia. NG/GB
Front-month gas futures NGc1 fell 8.4 cents, or 2.3%, to $3.646 per million British thermal units (mmBtu) at 9:55 a.m. EST (1455 GMT).
In 2021, the futures contract closed at $3.73 per mmBtu, up 47% from the end of 2020. That was its highest end-of-year close since 2013.
In the spot market, next-day gas prices at the Henry Hub NG-W-HH-SNL in Louisiana averaged $3.91 per mmBtu in 2021, their highest annual average since 2014.
Global gas prices repeatedly hit new all-time highs over the last few months, with the latest records set during the week before Christmas.
U.S. futures followed that spike in global prices – reaching a 12-year high of more than $6 per mmBtu in early October – but have retreated because the United States has plenty of gas in storage and ample production for the winter.
Analysts have said European gas inventories were about 20% below normal for this time of year, compared with about 1% above normal in the United States. EIA/GASNGAS/POLL
Data provider Refinitiv said gas output in the U.S. Lower 48 states slipped to an average of 94.8 billion cubic feet per day (bcfd) so far in January from a record 97.6 bcfd in December.
With the weather expected to remain colder than normal through mid-January, Refinitiv projected average U.S. gas demand, including exports, would jump from 128.9 bcfd this week to 132.0 bcfd next week as homes and businesses crank up their heaters. The forecast for this week was higher than Refinitiv’s outlook on Friday, but its forecast for next week was lower.
The amount of gas flowing to U.S. LNG export plants eased to an average of 11.9 bcfd so far in January from a record 12.2 bcfd in December.
With gas prices around $23 per mmBtu in Europe TRNLTTFMc1 and $30 in Asia JKMc1, compared with just about $4 in the United States, traders said buyers around the world would keep purchasing all the LNG the United States can produce.
But no matter how high global gas prices rise, the United States only has the capacity to turn about 12.2 bcfd of gas into LNG.
Global markets will have to wait until later this year for some of the 18 liquefaction trains under construction at Venture Global LNG’s Calcasieu Pass in Louisiana to start producing LNG. The plant has been pulling in small amounts of feed gas since around September as it prepares to begin operating.
