U.S. natural gas futures jumped nearly 17% to a near three-month high on Monday as demand rose for exports of liquefied natural gas (LNG), and weather forecasters boosted expectations for hot weather and cooling demand next week.
Front-month gas futures rose 30.2 cents, or 16.8%, to settle at $2.101 per million British thermal units, their highest close since May 5. That was their biggest one-day rise since November 2018.
"A combination of stagnant production ... and a hot change in August’s weather forecasts is creating a bullish set-up that has short sellers running for the exits," said Daniel Myers, market analyst at Gelber & Associates in Houston, noting this was the front-month’s first close above $2/mmBtu in three months and only the second since late January.
Last week, speculators boosted long positions on the New York Mercantile Exchange for a seventh straight week to their highest since November 2018 on expectations energy demand will rise as the economy rebounds from coronavirus lockdowns.
Data provider Refinitiv said average U.S. production fell to a two-month low of 87.8 billion cubic feet per day (bcfd) so far in August from 88.0 bcfd in July and an all-time monthly high of 95.4 bcfd in November.
With hot weather expected to return, Refinitiv projected U.S. demand, including exports, will rise from an average of 88.8 bcfd this week to 92.5 bcfd next week.
U.S. LNG exports in August are on track to rise for the first time in six months as the amount of pipeline gas flowing to the plants rose to 4.0 bcfd so far this month from a 21-month low of 3.3 bcfd in July when buyers canceled dozens of cargoes. That is still well below the record high of 8.7 bcfd in February.