U.S. natural gas futures climbed approximately 1% on Tuesday, reaching a five-month high. The increase was driven by projections of colder weather in late November, expected to boost heating demand and prompt utilities to withdraw gas from storage around the Thanksgiving holiday. December gas futures on the New York Mercantile Exchange rose by 2.5 cents, closing at $2.998 per million British thermal units (MMBtu), marking the highest level since mid-June. However, the gains were tempered by forecasts of milder weather over the next two weeks, which could reduce immediate heating needs.
Analysts noted that the ongoing mild autumn weather has likely allowed utilities to inject more gas into storage than usual for the week ending 15 November, and possibly for the following week as well. If this trend continues, it would be the first time since October 2022 that inventories increased above average for five consecutive weeks. Current storage levels are approximately 7% higher than the seasonal average, providing a buffer for winter demand.
In terms of supply, average gas production across the Lower 48 U.S. states has slightly decreased to 100.6 billion cubic feet per day (Bcf/d) so far this month, down from 101.3 Bcf/d in October. This remains below the record output of 105.3 Bcf/d set in December 2023. Many producers have scaled back drilling this year, partly due to historically low prices, with March seeing the lowest average prices in over three decades.
Weather forecasts suggest mostly warmer-than-usual temperatures across the Lower 48 states through 27 November, followed by colder-than-normal conditions from 28 November to early December. Correspondingly, gas demand, including exports, is expected to rise from an average of 107.7 Bcf/d this week to 115.4 Bcf/d next week, although these figures are slightly lower than earlier projections.
On the export front, the volume of gas flowing to the U.S.’s seven major LNG export plants has averaged 13.4 Bcf/d in November, up from 13.1 Bcf/d in October but still below the record 14.7 Bcf/d set in December 2023. This uptick highlights continued strong demand for U.S. natural gas on the global market.
Diversified Energy Company plc (LON:DEC) is an independent energy company engaged in the production, marketing, transportation and retirement of primarily natural gas and natural gas liquids related to its U.S. onshore upstream and midstream assets.
