U.S. natgas jump 10% as heat wave forces Texas to seek power conservation


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U.S. natural gas futures jumped about 10% to a two-week high on Monday on forecasts

for hotter-than-normal weather to continue across much of the country, including Texas where the power grid

operator urged consumers to conserve energy.

Texas’s power grid operator warned of potential rolling blackouts amid predictions demand would hit

all-time highs on Monday and Tuesday as homes and businesses crank up their air conditioners to escape the

extreme heat.

That jump in gas prices, which was only the highest in the past few days, came despite an increase in U.S.

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output to record highs and forecasts for lower gas demand over the next two weeks than previously expected.

Traders also noted the ongoing outage at Freeport LNG’s liquefied natural gas (LNG) export plant in Texas

will leave more gas in the United States for utilities to quickly refill low stockpiles for the winter.

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 has said the facility could return to service by October.

Some analysts, however, think the plant could remain shut longer.

In what has been an extremely volatile couple of months, front-month gas futures for August

delivery on the New York Mercantile Exchange (NYMEX) rose 58.1 cents, or 9.6%, to $6.615 per million British

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thermal units (mmBtu) at 9:22 a.m. EDT (1322 GMT), putting the contract on track for its highest since June

22.

That was the biggest one-day percentage gain since July 7 when prices rose by 14%. The increase also

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

row.

With the U.S. Federal Reserve expected to keep raising interest rates, open interest in NYMEX futures

fell on Friday to its lowest since July 2016 for a second day in a row as investors cut back on risky

assets like commodities.

Recent price increases prompted gas speculators last week to cut their net short futures and options

positions on the NYMEX and Intercontinental Exchanges, according to the U.S. Commodity Futures Trading

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Commission’s Commitments of Traders report.

So far this year, the front-month was up about 79% as much higher prices in Europe and Asia keep demand

for U.S. LNG exports strong, especially since Russia’s Feb. 24 invasion of Ukraine stoked fears Moscow would

cut gas supplies to Europe.

Gas was trading around $51 per mmBtu in Europe and $39 in Asia.

Since mid-June, Russia has exported around 3.8 bcfd of gas 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.

That is down from around 6.5 bcfd in early June and an average of 9.4 bcfd in July 2021.

Analysts expect Russian exports to Europe will drop further next week when Nord Stream shuts for

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maintenance from July 11-21.

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U.S. futures lag far behind global prices because the United States is the world’s top producer, with all

the gas 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 rose to 96.2 bcfd so far in

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

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

97.9 bcfd this week to 98.3 bcfd next week. Those forecasts were lower than Refinitiv’s outlook on Friday.

The average amount of gas flowing to U.S. LNG export plants slid to 11.1 bcfd so far in July from 11.2

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bcfd in June. That was down from 12.5 bcfd in May and a monthly record of 12.9 bcfd in March due to the

Freeport outage.

The seven big U.S. export plants can turn about 13.8 bcfd of gas into LNG.

Week ended Week ended Year ago Five-year

Jul 8 Jul 1 Jul 8 average

(Forecast) (Actual) Jul 8

U.S. weekly natgas storage change (bcf): +66 +60 +49 +55

U.S. total natgas in storage (bcf): 2,377 2,311 2,621 2,688

U.S. total storage versus 5-year average -11.6% -12.2%

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 6.37 6.03 3.82 3.73 2.89

Title Transfer Facility (TTF) 49.98 50.61 12.49 16.04 7.49

Japan Korea Marker (JKM) 39.39 39.57 13.77 18.00 8.95

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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 1 1 3 3 3

U.S. GFS CDDs 235 241 202 212 204

U.S. GFS TDDs 236 242 205 215 207

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 96.2 96.3 96.5 92.9 85.6

U.S. Imports from Canada 7.7 7.7 7.6 8.1 8.1

U.S. LNG Imports 0.0 0.0 0.0 0.0 0.1

Total U.S. Supply 103.9 104.0 104.1 101.0 93.8

U.S. Demand (bcfd)

U.S. Exports to Canada 2.3 2.1 2.1 2.3 2.3

U.S. Exports to Mexico 6.0 6.0 6.0 6.7 5.2

U.S. LNG Exports 11.2 11.0 10.7 10.8 4.5

U.S. Commercial 4.3 4.3 4.4 4.4 4.4

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U.S. Residential 3.5 3.5 3.5 3.5 3.6

U.S. Power Plant 41.1 42.7 43.2 38.0 39.6

U.S. Industrial 21.1 21.3 21.4 20.9 20.8

U.S. Plant Fuel 4.8 4.8 4.8 4.7 4.7

U.S. Pipe Distribution 2.0 2.1 2.1 2.0 2.0

U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1

Total U.S. Consumption 77.0 78.7 79.4 73.6 75.2

Total U.S. Demand 96.4 97.9 98.3 93.4 87.2

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

Week ended Week ended Week ended Week ended Week ended

Jul 15 Jul 8 Jul 1 Jun 24 Jun 17

Wind 12

Solar 3

Hydro 7

Other 2

Petroleum 0

Natural Gas 38

Coal 20

Nuclear 17

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

Hub Current Day Prior Day

Henry Hub 6.40 5.83

Transco Z6 New York 5.02 5.52

PG&E Citygate 6.85 6.55

Dominion South 5.18 5.21

Chicago Citygate 5.92 5.80

Algonquin Citygate 5.07 6.10

SoCal Citygate 6.49 5.96

Waha Hub 5.88 5.44

AECO 3.67 3.95

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

Hub Current Day

New England 47.25 59.75

PJM West 70.00 88.75

Ercot North 157.50 192.75

Mid C 72.50 39.77

Palo Verde 60.00 61.35

SP-15 59.50 61.75

(Reporting by Scott DiSavino)

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