US natural gas futures gained around 3% to reach a 14-week high on Monday following forecasts for higher demand over the next two weeks than was previously expected, as feed gas use at LNG plants has picked up with the return to production of the Freeport LNG facility in Texas. The ongoing decline in output is also supporting higher prices.
On the New York Mercantile Exchange, front-gas futures for June delivery rose by 2.5% to reach $2.195 per million British thermal unit, the highest level at close since January 29 for a second day in a row.
In response to three-and-a-half-year gas price lows in February and March, several large US energy companies including EQT and Chesapeake Energy have delayed well completions and cut back on drilling activities, causing US gas production to fall 9% so far in 2024.
In January, Chesapeake announced an all-stock merger with Southwestern Energy, in a move that will make it the biggest gas producer in the US. However, the deal has been delayed to the latter half of the year owing to scrutiny from the Federal Trade Commission.
According to Reuters, data from the London Stock Exchange Group (LSEG) showed that gas output in the lower 48 US states fell to an average of 96.9 billion cubic feet per day (bcf/d) so far in May, down from 98.1bcf/d in April. This stands in contrast to the monthly record of 105.5bcf/d in December 2023.
In April, the quantity of natural gas flowing into the seven largest LNG export plants, including Freeport LNG in Texas, increased by around 17% after hitting a 15-month low a few days prior.
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The increase was largely down to Freeport restarting one of its liquefaction trains, having closed down trains 1 and 2 in March for repairs and maintenance.
Last year, the US overtook Qatar and Australia to become the world’s largest exporter of LNG. In 2022, a fire at Freeport curtailed the nation’s output, but after it returned to full output in November 2023, the US exported a record 8.6 million tonnes of LNG from its terminals in December.
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