U.S. natgas hits 14-year high on hot forecasts, Russia export worries (updated)

Avante

26/07/2022 16:53

(Adds quotes, latest prices)
    July 26 (Reuters) - U.S. natural gas futures jumped to a 14-year high on Tuesday on forecasts for hotter
weather and higher demand over the next two weeks than previously expected, worries about a slowdown in
Russian gas flows to Europe, record coal prices and the coming expiration of the front-month contract.
    That puts the contract on track to gain a record-setting 70% in July. The current all-time monthly
percentage gain is 63% in September 2009.
    "Fundamentally, scorching hot weather is the predominant bullish driver," analysts at energy advisory EBW
Analytics said, noting the risk of price "fireworks" was increased because liquidity was thin with the August
front-month contract expiring on Wednesday.
    Over the past year, EBW said the last two days of front-month contract trading averaged a gain of 41.3
cents per million British thermal units (mmBtu).
    Extreme heat has already caused U.S. power demand to hit several all-time highs this summer in many
states, including Texas, as homes and businesses crank up their air conditioners.  urn:newsml:reuters.com:*:nL1N2Z111K
    To keep those air conditioners humming, electric companies were burning more gas than usual due to the
retirement of dozens of coal power plants in recent years and because coal prices  CQNYMC1  were at record
highs, making it uneconomic for many generators to switch on some of the coal plants that remain.
    The spike in gas price came despite an increase in gas output to near record levels and the ongoing outage
at the Freeport liquefied natural gas (LNG) export plant in Texas, which has left more gas in the United
States for utilities to inject into low stockpiles.  EIA/GAS   NGAS/POLL 
    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 estimated the facility will return to partial service in
October. Some analysts say the outage could last longer.  urn:newsml:reuters.com:*:nL1N2Z01UN  urn:newsml:reuters.com:*:nL1N2YU1QW  urn:newsml:reuters.com:*:nL1N2Z224T
    On its second to last day as the front-month, gas futures  NGc1  for August delivery rose 47.2 cents, or
5.4%, to $9.199 per mmBtu at 11:12 a.m. EDT (1512 GMT), putting the contract on track for its highest close
since hitting a near 14-year high of $9.322 in early June 2022.
    Earlier in the session, the front-month hit its highest since July 24, 2008.
    So far this year, the gas front-month is up 147% as much higher prices in Europe and Asia keep demand for
U.S. LNG exports strong, especially since Russia's invasion of Ukraine. The United States became the world's
top LNG exporter during the first half of 2022.  urn:newsml:reuters.com:*:nL4N2Z637F
    "The U.S. gas market has become international in recent years to the extent that overseas developments can
spill quickly into the U.S. market and U.S. export activity could remain maxed out through next year,"
analysts at Ritterbusch and Associates, a consultancy, said in a note.
    Gas was trading around $55 per mmBtu in Europe  TRNLTTFMc1  and at $39 in Asia  JKMc1 . That put European
prices up about 13% on the expectation of cuts in gas flows from Russia via the Nord Stream 1 pipeline and
prompted the European Union to curb gas use.  NG/EU   urn:newsml:reuters.com:*:nL1N2Z70AC
    Russian gas exports 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 have held near
3.8 bcfd since July 21 when Nord Stream exited a maintenance outage, up from around 1.4 bcfd for the 10 days
the pipe was shut.
    That was close to the 3.7 bcfd average during the month before Nord Stream shut but was still much lower
than the 9.4 bcfd average in July 2021.  NG/EU   urn:newsml:reuters.com:*:nL1N2Z2080  urn:newsml:reuters.com:*:nL8N2Z12JM  urn:newsml:reuters.com:*:nL1N2Z01KT  urn:newsml:reuters.com:*:nS8N2XR00O
 urn:newsml:reuters.com:*:nL8N2Z2644  urn:newsml:reuters.com:*:nL1N2Z3194
    
    TOP PRODUCER
    U.S. gas futures lag far behind global prices because the United States is the world's top producer, with
all the fuel 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 has risen to 96.1 bcfd so far
in July from 95.3 bcfd in June. That compares with a monthly record high of 96.1 bcfd in December 2021.
        
                                              Week ended     Week ended     Year ago   Five-year        
                                                Jul 22         Jul 15        Jul 22     average    
                                              (Forecast)      (Actual)                   Jul 22    
 U.S. weekly natgas storage change (bcf):         +30            +32          +38         +32           
 U.S. total natgas in storage (bcf):             2,431          2,401        2,709       2,761          
 U.S. total storage versus 5-year average       -12.0%         -12.0%                                   
                                                                                                        
                                                                                                        
 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  NGc1                                 8.99           8.73          3.82        3.73        2.89
 Title Transfer Facility (TTF)  TRNLTTFMc1       55.02          52.94        12.49       16.04        7.49
 Japan Korea Marker (JKM)  JKMc1                 39.39          38.10        13.77       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              4            2           2            3
 U.S. GFS CDDs                                    239            235          207         210          202
 U.S. GFS TDDs                                    243            239          209         212          205
                                                                                                        
 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                    96.3           96.3          96.8        93.4        85.6
 U.S. Imports from Canada                         8.1            8.3          8.4         8.2          8.1
 U.S. LNG Imports                                 0.0            0.0          0.0         0.0          0.1
 Total U.S. Supply                               104.4          104.7        105.2       101.6        93.8
                                                                                                        
 U.S. Demand (bcfd)                                                                                     
 U.S. Exports to Canada                           2.2            2.4          2.3         2.0          2.3
 U.S. Exports to Mexico                           6.2            5.9          6.1         6.5          5.2
 U.S. LNG Exports                                10.8           10.9          10.3        10.8         4.5
 U.S. Commercial                                  4.4            4.4          4.4         4.4          4.4
 U.S. Residential                                 3.5            3.6          3.6         3.5          3.6
 U.S. Power Plant                                45.7           43.7          43.1        42.1        39.6
 U.S. Industrial                                 21.3           21.3          21.3        21.0        20.8
 U.S. Plant Fuel                                  4.8            4.8          4.8         4.8          4.7
 U.S. Pipe Distribution                           2.2            2.1          2.1         2.2          2.0
 U.S. Vehicle Fuel                                0.1            0.1          0.1         0.1          0.1
 Total U.S. Consumption                          82.0           79.9          79.4        78.1        75.2
 Total U.S. Demand                               101.1          99.2          98.1        97.4        87.2
                                                                                                        
                                                                                                        
 U.S. weekly power generation percent by fuel - EIA                                                
                                              Week ended     Week ended    Week ended  Week ended  Week ended
                                                Jul 29         Jul 22        Jul 15      Jul 8        Jul 1
 Wind                                                                                                   
 Solar                                                                                                  
 Hydro                                                                                                  
 Other                                                                                                  
 Petroleum                                                                                              
 Natural Gas                                                                                            
 Coal                                                                                                   
 Nuclear                                                                                                
                                                                                                   
                                                                                                   
 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)
 Hub                                          Current Day     Prior Day                            
 Henry Hub  NG-W-HH-SNL                          8.52           8.25                               
 Transco Z6 New York  NG-CG-NY-SNL               7.90           8.75                               
 PG&E Citygate  NG-CG-PGE-SNL                    9.48           8.97                               
 Dominion South  NG-PCN-APP-SNL                  7.70           7.70                               
 Chicago Citygate  NG-CG-CH-SNL                  8.23           8.06                               
 Algonquin Citygate  NG-CG-BS-SNL                8.19           9.30                               
 SoCal Citygate  NG-SCL-CGT-SNL                  9.36           8.76                               
 Waha Hub  NG-WAH-WTX-SNL                        8.12           7.63                               
 AECO  NG-ASH-ALB-SNL                            4.68           4.77                               
                                                                                                   
 SNL U.S. Power Next-Day Prices ($ per megawatt-hour)
 Hub                                          Current Day                                          
 New England  EL-PK-NPMS-SNL                    100.00         155.75                              
 PJM West  EL-PK-PJMW-SNL                       109.75         130.75                              
 Ercot North  EL-PK-ERTN-SNL                    105.75          92.00                              
 Mid C  EL-PK-MIDC-SNL                          130.00         126.00                              
 Palo Verde  EL-PK-PLVD-SNL                      96.25         110.75                              
 SP-15  EL-PK-SP15-SNL                           99.75         105.00                              
 
 (Reporting by Scott DiSavino; editing by Jason Neely and Andrea Ricci)
 ((scott.disavino@thomsonreuters.com; +1 332 219 1922; Reuters Messaging:
scott.disavino.thomsonreuters.com@reuters.net))
 
((For Refinitiv type ENERGY in Eikon search bar and then go to the GAS drop down and the NORTH AMERICA drop down or see: cpurl://apps.cp./cms/?pageid=usa-gas
For Interactive Map, type 'Interactive Map' in the box at upper left of the Reuters Eikon terminal.                
For graphics on Baker Hughes rig counts, see: http://graphics.thomsonreuters.com/15/rigcount/index.html
For next-day SNL U.S. gas prices, see:  0#SNL-NG                 
For next-day SNL U.S. power prices, see:  0#SNL-PWR 
For U.S. natgas price and storage polls, see:  NGAS/POLL 
For U.S. nuclear power outages, see:  NUKE/                 
For U.S. Northwest hydro power report, see:  NWRFC                 
For U.S./Canada natural gas rig count vs Henry Hub futures price, see: http://tmsnrt.rs/2eT9k44
For the U.S. natural gas speed guide, see:  USGAS 
For the U.S. power speed guide, see:  USPOWER 
To determine CFTC managed money net position add (NYMEX Henry Hub options and futures combined  3023651MNET ) plus (ICE Henry Hub options and futures combined  3023391MNET  divided by four) plus (NYMEX Henry Hub swaps options and futures combined  303565BMNET  divided by four) plus (NYMEX Henry Hub penultimate gas swaps  303565CMNET  divided by four)
NYMEX Henry Hub options and futures combined  0#3CFTC023651 
NYMEX Henry Hub futures only  0#1CFTC023651 
ICE Henry Hub options and futures combined  0#3CFTC023391 
NYMEX Henry Hub swaps options and futures combined  0#3CFTC03565B 
NYMEX Henry Hub Penultimate gas swaps  0#3CFTC03565C ))