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NEW YORK (Reuters) – U.S. natural gas futures soared 3% to a one-week high on Tuesday on forecasts of much colder weather and higher heating demand. higher over the next two weeks than expected. Traders noted the price increase came despite the slow and continued return to U.S. production following cold weather-related cuts over the past month, and an 8% decline in gas futures. European Union as some Russian troops return to base, easing tensions with Ukraine.
Over the past month or so, the United States has worked with other countries to ensure that gas supplies – mostly liquefied natural gas – would continue to flow to Europe in the event that Russia cuts off supply to the rest of the continent.
If Russia invades Ukraine, the United States and Europe have said they will sanction Russia, and Russia will likely reduce at least some gas exports to Europe. Russia provided around 30-40% of Europe’s gas supplies, totaling around 16.3 billion cubic feet per day in 2021.
Year-to-date, however, the US gas market has focused more on US climate change and domestic supply and demand, rather than what is happening globally.
So far in 2022, US gas has tracked European prices only about a third of the time, compared to two-thirds in the fourth quarter of 2021. US gas futures for the first month for delivery in March rose 12.5 cents, or 3%, to $4.320 per British million. thermal units at 8:25 a.m. ET (1:25 p.m. GMT), putting the contract on track for its highest close since Feb. 4.
In the spot market, freezing weather and strong heating demand in the Northeastern United States this year kept next-day electricity and gas prices in New York and New England at their the highest levels or near them since January 2018. Data provider Refinitiv said average production in the Lower 48 U.S. states fell from a record 97.3 billion cubic feet per day in December at 94 billion cubic feet per day in January and 92.5 billion cubic feet per day so far in February, as cold weather froze wells in several producing regions.
On a daily basis, however, production soared to 95.2 billion cubic feet per day on Feb. 11, its highest since Jan. 1. Production has increased almost daily since falling to 86.3 billion cubic feet per day in a winter storm on February 4, its lowest since February 2021. .
Even though the weather is expected to be colder than expected, it is still on track to be less cold next week than this week with the arrival of spring-like weather in some areas. Refinitiv forecast average U.S. gas demand, including exports, to rise from 122.8 billion cubic feet per day this week to 118.8 billion cubic feet per day next week.
That forecast was higher than Refinitiv’s outlook on Monday due to expected colder weather. The amount of gas flowing to LNG export plants in the United States has averaged 12.7 billion cubic feet per day so far in February, which would surpass January’s monthly record of 12.4 billion cubic feet per day as liquefaction trains at Venture Global LNG’s Calcasieu Pass export plant in Louisiana come into service. A tanker arrived in Calcasieu on February 7 and is likely to leave soon with the factory’s first shipment.