U.S. natural gas futures recently increased by about 1%, reaching a four-week high due to a decrease in production and rising demand. This anticipated demand, reflecting recent forecasts, is primarily attributed to elevated gas flows to liquefied natural gas (LNG) export facilities. By 9:10 a.m. EDT on Thursday, June gas futures on the New York Mercantile Exchange had risen by 2.0 cents, or 0.6%, reaching $3.641 per million British thermal units. This price movement positions the contract for its highest closing value since April 9.
The price increase occurred before a federal report expected to reveal a significant storage build for the previous week. Analysts predicted utilities would add 101 billion cubic feet (bcf) of gas into storage for the week ending May 2, surpassing last year’s increase of 81 bcf and exceeding the five-year average of 79 bcf. Currently, gas stockpiles are approximately 1% above the five-year norm after facing below-normal levels from mid-January through late April due to record withdrawals during an exceptionally cold winter. On the supply front, average gas output in the Lower 48 U.S. states has dipped to 103.4 billion cubic feet per day in May, down from April’s record of 105.8 bcfd.
This decline follows a peak production of 107.4 bcfd on April 18. Analysts caution that an approximate 18% decrease in U.S. crude futures may prompt oil drillers to reduce their output, ultimately impacting associated gas production, as about 37% of U.S. gas comes from oil extraction. Meteorologists forecast warmer-than-normal temperatures across the Lower 48 states through May 23, with LSEG projecting average gas demand will decrease from 97.1 bcfd this week to 94.8 bcfd next week. So far in May, the average gas flow to the eight major LNG export plants has fell to 14.8 bcfd, primarily due to maintenance activities at certain facilities.
However, gas flows are expected to increase at some of these plants in the coming days.