U.S. natgas up 3% ahead of storage report on higher demand forecast

Reuters
·7 min read

Oct 6 (Reuters) - U.S. natural gas futures rose about 3% to a two-week high on Thursday on forecasts for higher demand next week than previously expected. That price increase came ahead of a federal report expected to show last week's storage build was much bigger than usual due to mild weather and an increase in wind power that reduced the amount of gas power generators needed to burn to produce electricity. Wind power produced about 9% of the nation's electricity last week, up from as little as 6% a few weeks earlier, according to federal energy data. Analysts forecast that U.S. utilities added 113 billion cubic feet (bcf) of gas to storage during the week ended Sept. 30. That compares with an increase of 114 bcf in the same week last year and a five-year (2017-2021) average increase of 87 bcf. If correct, last week's increase would push stockpiles to 3.090 trillion cubic feet (tcf), or 8.3% below the five-year average of 3.370 tcf for this time of the year. The gas price increase also came despite record monthly output and recent cuts in gas demand from power outages and reduced liquefied natural gas (LNG) exports. Over 202,000 homes and businesses were still without power in Florida after Hurricane Ian hit the state on Sept. 28-29, reducing the amount of gas that power generators need to burn. Gas demand was also reduced by outages at LNG export plants, including Berkshire Hathaway Energy's 0.8-billion cubic feet per day (bcfd) Cove Point in Maryland for about three weeks of planned work starting Oct. 1 and Freeport LNG's 2.0-bcfd plant in Texas for unplanned work after an explosion on June 8. Freeport LNG expects the facility to return to at least partial service in early to mid-November. Front-month gas futures rose 17.5 cents, or 2.5%, to $7.105 per million British thermal units (mmBtu) by 8:20 a.m. EDT (1220 GMT), putting the contract on track for its highest close since Sept. 21. U.S. futures were up about 90% so far this year as soaring global gas prices have fed demand for U.S. exports due to supply disruptions and sanctions linked to Russia's Feb. 24 invasion of Ukraine. Gas was trading around $50 per mmBtu in Europe and $35 in Asia. Russian gas exports via the three main lines into Germany - Nord Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route - have averaged just 1.3 bcfd so far in October, the same as September but well below 9.2 bcfd seen in October 2021. TOP PRODUCER U.S. gas futures lag far behind global prices because the United States is the world's top producer with all the fuel it needs for domestic use, while capacity constraints and the Freeport outage prevent the country from exporting more LNG. Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 100.1 bcfd so far in October from a monthly record of 99.4 bcfd in September. With cooler weather coming, Refinitiv projected average U.S. gas demand, including exports, would rise from 90.2 bcfd this week to 91.5 bcfd next week. The forecast for next week was higher than Refinitiv's outlook on Wednesday. The average amount of gas flowing to U.S. LNG export plants fell to 10.8 bcfd so far in October from 11.5 bcfd in September. That compares with a monthly record of 12.9 bcfd in March. The seven big U.S. export plants can turn about 13.8 bcfd of gas into LNG. So far this year, most U.S. LNG has gone to countries in Europe as they wean themselves off Russian energy. Russia, the world's second-biggest gas producer, has provided about a third of Europe's gas in recent years, totaling about 18.3 bcfd in 2021. The European Union wants to cut Russian gas imports by two-thirds by the end of 2022 and refill stockpiles to 80% of capacity by Nov. 1 and 90% by Nov. 1 each year beginning in 2023. Gas stockpiles in northwest Europe - Belgium, France, Germany and the Netherlands - were currently about 6% above their five-year (2017-2021) average for this time of year, according to Refinitiv. Storage was currently around 91% of capacity. That is much healthier than U.S. gas inventories, which were still about 9% below their five-year norm. Week ended Week ended Year ago Five-year Sep 30 Sep 23 Sep 30 average (Forecast) (Actual) Sep 30 U.S. weekly natgas storage change (bcf): +113 +103 +114 +87 U.S. total natgas in storage (bcf): 3,090 2,977 3,271 3,370 U.S. total storage versus 5-year average -8.3% -9.3% Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five Year Last Year Average Average 2021 (2017-2021) Henry Hub 6.98 6.93 5.57 3.73 2.89 Title Transfer Facility (TTF) 50.64 50.83 30.84 16.04 7.49 Japan Korea Marker (JKM) 35.05 38.20 33.22 18.00 8.95 Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days Two-Week Total Forecast Current Day Prior Day Prior Year 10-Year 30-Year Norm Norm U.S. GFS HDDs 102 105 46 88 114 U.S. GFS CDDs 54 53 74 67 51 U.S. GFS TDDs 156 158 120 155 165 Refinitiv U.S. Weekly GFS Supply and Demand Forecasts Prior Week Current Week Next Week This Week Five-Year Last Year Average For Month U.S. Supply (bcfd) U.S. Lower 48 Dry Production 98.4 100.1 100.5 93.5 87.0 U.S. Imports from Canada 7.9 8.0 7.9 8.3 7.7 U.S. LNG Imports 0.0 0.0 0.0 0.0 0.1 Total U.S. Supply 107.3 108.1 108.4 101.8 94.8 U.S. Demand (bcfd) U.S. Exports to Canada 1.9 2.1 2.1 2.0 2.4 U.S. Exports to Mexico 5.8 5.6 5.6 5.7 5.3 U.S. LNG Exports 11.8 11.1 10.2 10.0 5.6 U.S. Commercial 5.4 5.7 6.3 5.0 6.8 U.S. Residential 5.0 5.6 6.7 4.3 7.3 U.S. Power Plant 32.7 31.7 31.7 32.2 29.0 U.S. Industrial 21.6 21.5 21.8 20.9 21.8 U.S. Plant Fuel 4.9 4.9 5.0 4.9 4.9 U.S. Pipe Distribution 1.9 1.9 2.0 1.9 1.9 U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1 Total U.S. Consumption 71.7 71.4 73.6 69.3 71.8 Total U.S. Demand 91.2 90.2 91.5 87.0 85.1 U.S. weekly power generation percent by fuel - EIA Week ended Week ended Week ended Week ended Week ended Oct 7 Sep 30 Sep 23 Sep 16 Sep 9 Wind 9 9 10 8 6 Solar 4 4 3 3 3 Hydro 5 6 5 5 6 Other 3 3 2 2 2 Petroleum 0 0 0 0 0 Natural Gas 41 41 41 42 45 Coal 18 18 19 19 21 Nuclear 20 21 19 19 18 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu) Hub Current Day Prior Day Henry Hub 5.84 5.40 Transco Z6 New York 5.86 5.25 PG&E Citygate 7.88 7.48 Dominion South 5.67 4.99 Chicago Citygate 6.15 5.21 Algonquin Citygate 6.05 5.45 SoCal Citygate 7.97 7.65 Waha Hub 4.62 5.03 AECO 4.18 5.35 SNL U.S. Power Next-Day Prices ($ per megawatt-hour) Hub Current Day Prior Day New England 63.25 63.25 PJM West 78.50 71.75 Ercot North 69.00 58.00 Mid C 78.20 77.00 Palo Verde 72.25 74.50 SP-15 82.00 79.50 (Reporting by Scott DiSavino; Editing by Kirsten Donovan)

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