U.S. natgas futures jump 5% ahead of options expiration


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U.S. natural gas futures jumped about 5% on Monday from a 11-week low in the prior

session in volatile trade with the expiration of the July contract options.

“Over the past twelve months, the front-month natural gas contract has increased in eight of twelve

occurrences on options expiration day,” analysts at energy advisory EBW Analytics said in a note.

That price jump came despite rising output and forecasts for lower demand over the next two weeks than

previously expected due in part to a drop in liquefied natural gas (LNG) exports from the shutdown of Freeport

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LNG’s Texas plant.

Analysts said the Freeport shutdown on June 8 should allow U.S. utilities to quickly rebuild low gas

stockpiles for next winter, but will reduce the amount of U.S. gas available to the rest of the world.

That is a problem for Europe where most U.S. LNG has gone as countries there wean themselves off Russian

energy after Moscow’s Feb. 24 invasion of Ukraine.

Freeport, the second-biggest U.S. LNG export plant, consumes about 2 billion cubic feet per day (bcfd) of

gas, so a 90-day shutdown would make about 180 billion cubic feet (bcf) of additional gas available to the

U.S. market.

On its second to last day as the front month, gas futures for July delivery rose 28.1 cents, or

4.5%, to settle at $6.501 per million British thermal units (mmBtu). On Friday, the contract closed at its

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lowest since April 6.

Traders said gas futures rose after bouncing off technical support around $6 per mmBtu.

Futures for August, which will soon be the front month, were up about 5% to $6.57 per mmBtu.

U.S. gas futures were up about 74% so far this year as much higher prices in Europe and Asia keep demand

for U.S. LNG exports strong, especially since Russia’s invasion of Ukraine stoked fears Moscow might cut gas

supplies to Europe.

Gas was trading around $41 per mmBtu in Europe and $37 in Asia.

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Data provider Refinitiv said average gas output in the U.S. Lower 48 states has slid to 95.1 bcfd so far

in June from 95.2 bcfd in May. That compares with a monthly record of 96.1 bcfd in December 2021.

On a daily basis, however, output rose to 96.1 bcfd on Saturday, its highest since December 2021.

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With hotter weather coming, Refinitiv projected average U.S. gas demand including exports would rise from

93.9 bcfd this week to 96.3 bcfd next week. Those forecasts were lower than Refinitiv’s outlook on Friday.

The amount of gas flowing to U.S. LNG export plants has fallen from an average of 12.5 bcfd in May to 11.2

bcfd so far in June due to the Freeport outage. That compares with a monthly record of 12.9 bcfd in March.

The seven big U.S. export plants can turn about 13.6 bcfd of gas into LNG.

Russia has kept pipeline exports around 3.7 bcfd since the middle of June on the three main lines into

Germany – North Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany), and the

Russia-Ukraine-Slovakia-Czech Republic-Germany route. That compares with a recent high of 6.5 bcfd about two

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weeks ago, and an average of 11.6 bcfd in June 2021.

Gas stockpiles in Northwest Europe – Belgium, France, Germany and the Netherlands – were

about 9% below the five-year (2017-2021) average for this time of year, and down from 39% below the five-year

norm in mid-March, according to Refinitiv. Storage was currently about 52% of full capacity.

That is healthier than U.S. inventories, which were around 13% below their five-year norm.

Week ended Week ended Year ago Five-year

Jun 24 Jun 17 Jun 24 average

(Forecast) (Actual) Jun 24

U.S. weekly natgas storage change (bcf): +70 +74 +73 +73

U.S. total natgas in storage (bcf): 2,239 2,169 2,547 2,573

U.S. total storage versus 5-year average -13.0% -13.2%

Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five Year

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Last Year Average Average

2021 (2017-2021)

Henry Hub 6.14 6.22 3.27 3.73 2.89

Title Transfer Facility (TTF) 41.07 40.12 10.27 16.04 7.49

Japan Korea Marker (JKM) 37.10 37.13 11.58 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 2 2 5 6

U.S. GFS CDDs 220 223 202 197 189

U.S. GFS TDDs 224 225 204 202 195

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 95.2 95.8 96.1 91.0 84.6

U.S. Imports from Canada 7.7 7.7 7.7 8.0 7.7

U.S. LNG Imports 0.0 0.0 0.0 0.0 0.1

Total U.S. Supply 102.9 103.5 103.8 99.0 92.4

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U.S. Demand (bcfd)

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

U.S. Exports to Mexico 6.0 6.1 6.1 6.5 5.1

U.S. LNG Exports 10.6 10.5 11.3 11.1 4.3

U.S. Commercial 4.4 4.4 4.3 4.3 4.7

U.S. Residential 3.7 3.5 3.5 3.5 4.3

U.S. Power Plant 37.9 39.3 41.0 39.5 32.8

U.S. Industrial 21.0 21.0 20.9 20.8 20.9

U.S. Plant Fuel 4.7 4.7 4.7 4.7 4.7

U.S. Pipe Distribution 2.0 2.0 2.0 2.0 1.8

U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1

Total U.S. Consumption 73.8 75.1 76.7 74.9 69.3

Total U.S. Demand 92.7 93.9 96.3 94.8 80.9

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

Week ended Week ended Week ended Week ended Week ended

Jul 1 Jun 24 Jun 17 Jun 10 Jun 3

Wind 12 8 12

Solar 3 5 4

Hydro 7 7 7

Other 2 2 2

Petroleum 0 0 0

Natural Gas 38 41 36

Coal 20 20 19

Nuclear 17 19 19

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

Hub Current Day Prior Day

Henry Hub 5.80 6.54

Transco Z6 New York 5.74 5.63

PG&E Citygate 7.49 8.08

Dominion South 5.38 5.68

Chicago Citygate 5.88 6.36

Algonquin Citygate 5.95 5.95

SoCal Citygate 6.57 7.58

Waha Hub 5.50 6.20

AECO 4.63 4.97

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

Hub Current Day

New England 67.75 61.50

PJM West 99.25 95.75

Ercot North 86.00 111.50

Mid C 66.00 2.00

Palo Verde 73.50 74.00

SP-15 71.00 74.25

(Reporting by Scott DiSavino; Editing by Jan Harvey and Chizu Nomiyama)

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