U.S. natgas hits 14-year high on hotter forecasts, Russia export worries

U.S. natural gas futures jumped to a 14-year high on Tuesday on forecasts for hotter

weather and higher than previously expected demand over the next two weeks, worries about Russian gas flows to

Europe and record coal prices.

The contract is on track to gain 69% in July, which would top the record gain of 63% in September 2009.

Extreme heat has already caused U.S. power demand to hit several all-time highs this summer in many

states, including Texas, as homes and businesses crank up their air conditioners.

To keep those air conditioners humming, electric companies were burning more gas than usual due to the

retirement of dozens of coal power plants in recent years and because coal prices were at record

highs, making it uneconomic for many generators to switch to some of the coal plants that remain.

The gas price increase came despite an increase in output to near record levels and the ongoing outage at

the Freeport liquefied natural gas (LNG) export plant in Texas, which has left more gas in the United States

for utilities to inject into low stockpiles.

Freeport, the second-biggest U.S. LNG export plant, was consuming about 2 billion cubic feet per day

(bcfd) of gas before it shut on June 8. Freeport LNG estimated the facility will return to partial service in

October. Some analysts expect the outage to last longer.

On its second to last day as the front month, gas futures for August delivery rose 42.4 cents, or

4.9%, to $9.151 per million British thermal units (mmBtu) at 9:08 a.m. EDT (1308 GMT), putting the contract on

track for its highest close since August 2008. Earlier in the session, the front-month hit its highest since

July 24, 2008.

That boosted the premium of futures for August over September to a record high for a second

day in a row. The September contract, which will soon be the front-month, was up 49 cents to $9.07 per

mmBtu.

So far this year, the gas front-month is up 150% as much higher prices in Europe and Asia keep demand for

U.S. LNG exports strong, especially since Russia’s invasion of Ukraine.

Gas was trading around $55 per mmBtu in Europe and at $39 in Asia. That put European

prices up about 10% on the expectation of further cuts in gas flows from Russia via the Nord Stream 1

pipeline.

Russian gas exports on 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 held near

3.8 bcfd since July 21 when Nord Stream exited a maintenance outage, up from around 1.4 bcfd for the 10 days

the pipe was shut.

That was close to the 3.7 bcfd average during the month before Nord Stream shut but was still much lower

than the 9.4 bcfd average in July 2021.

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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 limit LNG exports.

Data provider Refinitiv said average gas output in the U.S. Lower 48 states has risen to 96.1 bcfd so far

in July from 95.3 bcfd in June. That compares with a monthly record high of 96.1 bcfd in December 2021.

Refinitiv projected average U.S. gas demand including exports would slide from 99.2 bcfd this week to 98.1

bcfd next week as extreme heat starts to ease in some parts of the country. Those forecasts were higher than

Refinitiv’s outlook on Monday.

The average amount of gas flowing to U.S. LNG export plants eased to 11.0 bcfd so far in July from 11.2

bcfd in June due to reductions at Cheniere Energy Inc’s Sabine Pass and Venture Global LNG’s Calcasieu

Pass plants in Louisiana this week.

Week ended Week ended Year ago Five-year

Jul 22 Jul 15 Jul 22 average

(Forecast) (Actual) Jul 22

U.S. weekly natgas storage change (bcf): +30 +32 +38 +32

U.S. total natgas in storage (bcf): 2,431 2,401 2,709 2,761

U.S. total storage versus 5-year average -12.0% -12.0%

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 8.99 8.73 3.82 3.73 2.89

Title Transfer Facility (TTF) 55.02 52.94 12.49 16.04 7.49

Japan Korea Marker (JKM) 39.39 38.10 13.77 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 4 4 2 2 3

U.S. GFS CDDs 239 235 207 210 202

U.S. GFS TDDs 243 239 209 212 205

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 96.3 96.3 96.8 93.4 85.6

U.S. Imports from Canada 8.1 8.3 8.4 8.2 8.1

U.S. LNG Imports 0.0 0.0 0.0 0.0 0.1

Total U.S. Supply 104.4 104.7 105.2 101.6 93.8

U.S. Demand (bcfd)

U.S. Exports to Canada 2.2 2.4 2.3 2.0 2.3

U.S. Exports to Mexico 6.2 5.9 6.1 6.5 5.2

U.S. LNG Exports 10.8 10.9 10.3 10.8 4.5

U.S. Commercial 4.4 4.4 4.4 4.4 4.4

U.S. Residential 3.5 3.6 3.6 3.5 3.6

U.S. Power Plant 45.7 43.7 43.1 42.1 39.6

U.S. Industrial 21.3 21.3 21.3 21.0 20.8

U.S. Plant Fuel 4.8 4.8 4.8 4.8 4.7

U.S. Pipe Distribution 2.2 2.1 2.1 2.2 2.0

U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1

Total U.S. Consumption 82.0 79.9 79.4 78.1 75.2

Total U.S. Demand 101.1 99.2 98.1 97.4 87.2

U.S. weekly power generation percent by fuel – EIA

Week ended Week ended Week ended Week ended Week ended

Jul 29 Jul 22 Jul 15 Jul 8 Jul 1

Wind

Solar

Hydro

Other

Petroleum

Natural Gas

Coal

Nuclear

SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)

Hub Current Day Prior Day

Henry Hub 8.52 8.25

Transco Z6 New York 7.90 8.75

PG&E Citygate 9.48 8.97

Dominion South 7.70 7.70

Chicago Citygate 8.23 8.06

Algonquin Citygate 8.19 9.30

SoCal Citygate 9.36 8.76

Waha Hub 8.12 7.63

AECO 4.68 4.77

SNL U.S. Power Next-Day Prices ($ per megawatt-hour)

Hub Current Day

New England 100.00 155.75

PJM West 109.75 130.75

Ercot North 105.75 92.00

Mid C 130.00 126.00

Palo Verde 96.25 110.75

SP-15 99.75 105.00

(Reporting by Scott DiSavino; editing by Jason Neely)