US natgas futures rise

Wednesday, 12 August 2020
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US natural gas (natgas) futures rose yesterday almost reaching their highest since December.

This was on the back of a daily reduction in output, forecasts for hot weather through late August and continued increase in LNG exports.

Front-month gas futures rose 3.2 cents, or 1.5%, to $2.185 per MMBtu, which put the contract within a few cents of Friday's close, which was the highest settle since 26th December.

Looking ahead, futures for the balance of 2020 and calendar 2021 were trading over the front-month by 18% and 27%, respectively, on hopes that energy demand will rise as the economy rebounds from the various lockdowns.

On Tuesday, US output was on track to fall 2.5 bill cu ft per day, the most in a day since early May, to 87.2 bill cu ft, according to preliminary data from Refinitiv that was subject to change, Reuters said.

Although US and European gas contracts mostly trade on their own fundamentals, a 47% jump in prices at the European Title Transfer Facility (TTF) benchmark in the Netherlands thus far in August has helped drag US gas up about 22% this month.

This made it profitable for more US LNG cargoes to be shipped to Europe again for the first time in months.

August US LNG exports were on track to rise for the first time in six months. Pipeline gas flowing to the plants climbed to 4.2 bill cu ft per day this month from a 21-month low of 3.3 bill in July, when buyers cancelled dozens of cargoes - the most in a month.

Refinitiv forecast that US demand, including exports, will hold at near 88.9 bill cu ft over the next two weeks. However, this was lower than Refinitiv's outlook on Monday, as higher gas prices make it cheaper for some power generators to burn coal instead of gas.

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