U.S. natural gas futures gained about 4% on May 16 as higher European prices keep U.S. LNG exports strong even though Europe has more gas in storage compared with normal than the United States.
Also supporting U.S. prices, power demand in Texas was expected to soar to a monthly record on May 16 as homes and businesses crank up their air conditioners to escape another spring heat wave.
Traders noted U.S. prices were up despite a 7% drop in European prices and forecasts for milder weather and lower U.S. demand over the next two weeks than previously expected.
European prices fell after the EU came up with a plan to meet Russia’s rouble payment demand for gas purchases despite worries Moscow could still cut exports to Europe now that Finland and Sweden were closer to joining the North Atlantic Treaty Organization (NATO).
U.S. front-month gas futures for June delivery rose 29.3 cents, or 3.8%, to settle at $7.956 per MMBtu, their highest close since May 6.
U.S. gas futures were up about 113% since the start of the year as higher global prices kept demand for U.S. LNG exports strong since Russia's Feb. 24 invasion of Ukraine.
Gas was trading around $28 per MMBtu in Europe and $20 in Asia. The U.S. contract rose to a 13-year high near $9 on May 6.
The U.S. gas market remains mostly shielded from those much higher global prices because the United States is the world's top gas producer, with all the fuel it needs for domestic use while capacity constraints inhibit exports of more LNG no matter how high global prices rise.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states climbed to 94.9 Bcf/d so far in May from 94.5 Bcf/d in April. That compares with a monthly record of 96.1 Bcf/d in November 2021.
Refinitiv projected average U.S. gas demand, including exports, would slide from 89.2 Bcf/d this week to 88.4 Bcf/d next week. Those forecasts were lower than Refinitiv's outlook on May 13.
The amount of gas flowing to U.S. LNG export plants held at 12.2 Bcf/d so far in May, the same as April. That compares with a monthly record of 12.9 Bcf/d in March. The U.S. can turn about 13.2 Bcf/d of gas into LNG.
Since the United States will not be able to produce much more LNG anytime soon, it has worked with allies to divert LNG exports from elsewhere to Europe to help EU countries and others break their dependence on Russian gas.
Russia, the world’s second-biggest gas producer, has provided about 30% to 40% of Europe’s gas, totaling about 18.3 Bcf/d in 2021. The EU wants to cut Russian gas imports by two-thirds by the end of 2022 and refill stockpiles to 80% of capacity by Nov. 1, 2022, and 90% by Nov. 1 each year beginning in 2023.
Russian gas exports to Europe rose to around 8.2 Bcf/d on May 15 from about 8.1 Bcf/d on May 13 on the three mainlines into Germany: North Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route. That compares with an average of 11.9 Bcf/d in May 2021.
Gas stockpiles in Northwest Europe - Belgium, France, Germany and the Netherlands—were about 14% below the five-year (2017-2021) average for this time of year, down from 39% below the five-year norm in mid-March, according to Refinitiv. Storage was currently about 36% of full capacity.
U.S. inventories, meanwhile, were around 16% below their five-year norm.
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