U.S. natural gas prices have experienced a notable surge, with futures rising sharply due to a combination of record outputs heading into March and fluctuating demand related to forecasts for cooler weather. On March 19, front-month gas futures for April delivery on the New York Mercantile Exchange rose 19.5 cents, or 4.8%, to settle at $4.247 per million British thermal units (mmBtu), marking the highest close since March 11. This surge arrives amid reports that the U.S. is on course to set monthly records for gas outputs and liquefied natural gas (LNG) exports.
According to financial firm LSEG, average gas output in the Lower 48 states reached 105.8 billion cubic feet per day (bcfd) so far this month, surpassing a previous record of 105.1 bcfd logged in February. However, preliminary data indicated that output could drop by approximately 2.8 bcfd over recent days, settling at a three-week low of 103.9 bcfd.
Traders have attributed the decline partly to spring pipeline maintenance in Texas and other states. In light of this, spot prices at the Waha Hub in West Texas dipped below zero earlier this week, highlighting the region's supply challenges.
The weather forecast also played a significant role in influencing demand. Meteorologists project that weather conditions in the Lower 48 states will largely remain near normal through April 3. This means that while the demand for gas is expected to rise, it won't exceed the initially projected figures. Average gas demand, including exports, is expected to rise from 106.7 bcfd this week to 109.8 bcfd next week according to LSEG; however, this forecast was slightly downgraded from earlier estimates.
Supporting LNG exports, the amount of gas heading to the eight major U.S. LNG export plants averaged 15.7 bcfd in March, increasing from February's record of 15.6 bcfd. Notably, ongoing construction and commissioning activities at Venture Global's 3.2 billion cubic feet per day Plaquemines LNG facility in Louisiana are contributing to upscaling capacities to meet global demands.
U.S. gas prices remain elevated, particularly due to ongoing global circumstances. As per prices on global benchmarks, gas was trading at approximately $14 per mmBtu in both the Dutch Title Transfer Facility (TTF) in Europe and the Japan Korea Marker (JKM) in Asia. The United States has emerged as the world’s leading LNG supplier since 2023, overtaking Australia and Qatar, amidst heightened demand driven by supply disruptions and geopolitical issues arising from the war in Ukraine.
As the market for natural gas continues to evolve, investors and analysts are closely monitoring reports from the Energy Information Administration (EIA) regarding the weekly nat-gas inventories. The latest consensus anticipates an increase of 4 billion cubic feet (bcf) in inventories for the week concluding on March 14. This arrives following last Thursday's report, which revealed that inventories experienced a robust draw of 62 bcf, notably above an anticipated drop of 50 bcf.
Despite these bullish trends, market sentiments have been influenced by cooler weather projections, which suggest gas utilities may not need to draw as significantly on storage in the coming weeks. It remains to be seen how these factors will balance each other out as the energy landscape shifts.
On the LNG front specifically related to Latin America, recent reports denote a downward trend in delivered ex-ship (DES) prices to various terminals. As of March 19, DES prices for April at Bahia Blanca in Argentina fell by 2.1 cents to $12.99/MMBtu, while the Pecém terminal in Brazil priced at $12.81, down 2.3 cents. In contrast, Chile's Quintero terminal was able to command the highest price for LNG at $13.09, slightly outpacing those available along Mexico’s coast, where prices dropped to $13.01.
The interplay between domestic demand, international exports, and the ever-evolving market dynamics continues to set the tone and direction of the U.S. natural gas sector. With the upcoming focus on inventory reports and weather patterns, stakeholders are gearing up for what could be a pivotal moment in the energy market.
