Saturday, May 28

US natgas eases from 7-week high on small storage withdrawal


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US natural gas futures eased on Thursday from a seven-week high during the prior

two sessions on a smaller than expected storage draw last week when the weather was milder than normal.

That US price decline came even though rising global demand for gas to replace Russian fuel after the

country’s invasion of Ukraine keeps US liquefied natural gas (LNG) exports near record highs and European

gas prices about eight times over US futures.

The US Energy Information Administration (EIA) said US utilities pulled 51 billion cubic feet (bcf) of

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gas from storage during the week ended March 18.

That was lower than the 56-bcf decline analysts forecast in a Reuters poll and compares with a decline of

29 bcf in the same week last year and a five-year (2017-2021) average decline of 62 bcf.

Last week’s withdrawal cut stockpiles to 1.389 trillion cubic feet (tcf), or 17.4% below the five-year

average of 1.682 tcf for this time of the year.

Although it will be cooler next week, meteorologists forecast the weather in the United States will remain

near normal through early April, which should keep heating demand low enough to allow utilities to inject gas

into storage this week – about a week earlier than usual. Supply and demand forecasts next week, however, were

about even, and utilities will likely leave stockpiles little changed.

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US front-month gas futures fell 5.4 cents, or 1.0%, to $5.178 per million British thermal units

(mmBtu) at 10:38 am EDT (1438 GMT). On Wednesday, the contract closed at it highest since Feb. 2 for a

second day in a row.

The US market remains mostly shielded from higher global prices because the United States has all the

fuel it needs for domestic use, and the country’s ability to export more LNG is constrained by limited

capacity.

The United States is already producing LNG near full capacity. So, no matter how high global gas prices

rise, it will not be able to export much more of the supercooled fuel. European gas jumped about

8% to around $39 per mmBtu earlier on Thursday on worries Russia could cut supplies after demanding payment

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for gas in roubles. Russia is the world’s second-biggest gas producer, after the United States.

Before Russia’s Feb. 24 invasion of Ukraine, the United States worked with other countries to ensure gas

supplies, mostly from LNG, would keep flowing to Europe. Russia has provided around 30% to 40% of Europe’s

gas, which totaled about 18.3 billion cubic feet per day (bcfd) in 2021.

Data provider Refinitiv said average gas output in the US lower 48 states was on track to rise to 93.3

bcfd in March from 92.5 bcfd in February as more oil and gas wells return to service after freezing earlier in

the year. That compares with a monthly record of 96.2 bcfd in December.

With cooler weather coming, Refinitiv projected average US gas demand, including exports, would rise

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from 97.0 bcfd this week to 102.3 bcfd next week. The forecast for this week was higher and the forecast for

next week was lower than Refinitiv’s outlook on Wednesday.

The amount of gas flowing to US LNG export plants rose to 12.78 bcfd so far in March from 12.43 bcfd in

February and a record 12.44 bcfd in January. The United States has the capacity to turn about 12.7 bcfd of gas

into LNG. The rest of the gas flowing to the plants is used to operate the facilities.

Traders said US LNG exports would remain near record levels for as long as global gas prices trade well

above US futures as utilities around the world scramble for cargoes to meet surging demand in Asia and

replenish low inventories in Europe, especially with the threat Russia could cut European supplies.

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Gas stockpiles in Western Europe (Belgium, France, Germany and the Netherlands) were about

35% below the five-year (2017-2021) average for this time of year, according to Refinitiv. That compares with

inventories about 17% below normal in the United States.

Traders placed most of their US-style options bets for April on $5 per mmBtu calls. Most gas options

traded on the NYMEX are European-style, which can only be exercised on the day of expiration, which is March

25 for the April options. US-style options can be exercised at any time.

Week ended Week ended Year ago Five-year

Mar 18 Mar 11 Mar 18 average

(Actual) (Actual) Mar 18

US weekly natgas storage change (bcf): -51 -79 -29 -62

US total natgas in storage (bcf): 1,389 1,440 1,755 1,682

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US total storage versus 5-year average -17.4% -17.4%

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 5.24 5.23 2.62 3.73 2.89

Title Transfer Facility (TTF) 40.27 36.44 6.11 16.04 7.49

Japan Korea Marker (JKM) 34.12 34.18 6.39 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

US GFS HDDs 233 232 198 234 223

US GFS CDDs 19 19 15 22 20

US GFS TDDs 252 251 213 256 243

Refinitiv US Weekly GFS Supply and Demand Forecasts

Prior Week Current Week Next Week This Week Five-Year

Last Year Average For

Month

US Supply (bcfd)

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US Lower 48 Dry Production 92.6 93.8 93.9 91.0 84.7

US Imports from Canada 8.4 8.1 8.4 8.2 8.5

US LNG Imports 0.0 0.0 0.0 0.0 0.1

Total US Supply 100.9 101.9 102.3 99.2 93.3

US Demand (bcfd)

US Exports to Canada 3.4 3.5 3.5 3.2 2.8

US Exports to Mexico 5.6 5.6 5.7 6.1 4.9

US LNG Exports 12.9 13.0 13.1 11.6 5.4

US Commercial 12.8 9.7 11.5 9.2 12.3

US Residential 19.8 13.8 17.0 13.1 19.5

US Power Plant 24.3 21.9 21.6 23.3 25.0

US Industrial 23.8 22.8 23.1 22.8 23.2

US Plant Fuel 4.6 4.6 4.6 4.6 4.6

US Pipe Distribution 2.3 2.0 2.1 2.3 2.7

US Vehicle Fuel 0.1 0.1 0.1 0.1 0.1

Total US Consumption 87.7 75.0 80.0 75.4 87.4

Total US Demand 109.5 97.0 102.3 96.3 100.5

US weekly power generation percent by fuel – EIA

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Week ended Week ended Week ended Week ended Week ended Week ended

Mar 25 Mar 18 Mar 11 Mar 4 Feb 25

Wind 17 15 13 10 12

Solar 3 3 3 3 3

Hydro 8 8 8 7 7

Other 2 2 2 2 2

Petroleum 0 0 0 1 1

Natural Gas 30 31 33 34 33

Coal 18 20 21 22 22

Nuclear 21 20 20 21 20

SNL US Natural Gas Next-Day Prices ($ per mmBtu)

Hub Current Day Prior Day

Henry Hub 5.26 5.00

Transco Z6 New York 4.42 4.12

PG&E Citygate 5.55 5.31

Dominion South 4.36 4.04

Chicago Citygate 4.75 4.75

Algonquin Citygate 4.95 4.95

SoCal Citygate 4.76 4.61

Waha Hub 4.40 4.30

AECO 4.03 3.95

SNL US Power Next-Day Prices ($ per megawatt-hour)

Hub Current Day

New England 53.75 54.50

PJM West 41.25 32.75

Ercot North 56.00 45.00

Mid C 39.96 36.86

Palo Verde 37.75 30.00

SP-15 46.75 44.25

(Reporting by Scott DiSavino

Editing by Nick Zieminski and Barbara Lewis)

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