U.S. natural gas futures climbed about 3% to an eight-month high on Wednesday after breaking through a key point of technical resistance on lower output and forecasts for cooler weather and rising exports.
That price increase happened even though the weather was expected to remain warmer than usual over the next two weeks – just not as warm as previously expected – which should keep demand for both heating and cooling low.
Front-month gas futures for November delivery on the New York Mercantile Exchange rose 9.5 cents, or 3.2%, to $3.044 per million British thermal units (mmBtu) at 9:23 a.m. EDT (1323 GMT), putting the contract on track for its highest close since Jan. 27.
That price gain pushed the front-month into technically overbought territory after breaking through the key psychological $3 per mmBtu level of resistance for the first time since early August. Prices have not closed above $3 since March.
Financial firm LSEG said average gas output in the lower 48 U.S. states slid to 102.4 billion cubic feet per day (bcfd) so far in October, down from 102.9 bcfd in September and a monthly record high of 103.1 bcfd in August.
Meteorologists forecast the weather in the lower 48 states would remain mostly warmer than normal through Oct. 19.
LSEG forecast U.S. gas demand, including exports, would hold near 95.1 bcfd this week and next. Those forecasts were similar to LSEG’s outlook on Tuesday.
Pipeline exports to Mexico rose to an average of 7.3 bcfd so far in October, up from a record 7.2 bcfd in September, according to LSEG data.
Analysts expect exports to Mexico to rise even higher in coming months once New Fortress Energy’s plant in Altamira starts pulling in U.S. gas to turn into liquefied natural gas (LNG) for export.
Gas flows to the seven big U.S. LNG export plants held around 12.6 bcfd so far in October, the same as in September. That compares with a monthly record of 14.0 bcfd in April.
Energy traders said they expected Berkshire Hathaway Energy’s 0.8-bcfd Cove Point facility in Maryland to exit a maintenance outage over the next week or so based in part on company notices to customers that some pipeline work was expected to be completed on Oct. 4. Cove Point shut around Sept. 20. Analysts at LSEG have said the plant usually shuts for about three weeks of maintenance each autumn.
The U.S. is on track to become the world’s biggest LNG supplier in 2023, ahead of recent leaders Australia and Qatar. Much higher global prices have fed demand for U.S. exports due to supply disruptions and sanctions linked to the war in Ukraine.
Gas was trading around $12 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe and $14 at the Japan Korea Marker (JKM) in Asia.
(Reporting by Scott DiSavino, Editing by Nick Zieminski)