U.S. Natural Gas Futures Skyrocket on Record LNG Export Demand

Cold, dry Arctic air moving across the central and eastern US early next week will cause temperatures to drop to 10-15 degrees below average, according to the Weather Prediction Center.

The chilly forecast is causing natural gas prices to spike, as the demand for heating fuel increase,s as it normally does this time of year.

Natural gas now provides about 40% of US electricity.

U.S. natural gas futures on Monday climbed above $4.30 per MMBtu, the highest since March. The colder forecast is one factor behind the price rise; the other is robust LNG exports to Europe and Asia.

Trading Economics said LNG export flows averaged 16.6 billion cubic feet per day in October, setting a new record:

European buyers continued to rely heavily on US gas as Russian supplies dwindled and inventories in key hubs fell, while Washington pushed for new energy commitments in trade talks with Asian partners.

Finimize reported that eight major export terminals are shipping out a record 17.2 billion cubic feet per day in November, based on data from the London Stock Exchange Group (LSEG). Meanwhile, domestic production has reached an all-time high, averaging 109 billion cubic feet per day.

Finimize says speculators are piling in, even though warmer weather has, for now, curbed heating demand. Over the last three months, gas futures have surged 34%, while oil prices have dropped 12%. This has pushed the oil-to-gas price ratio to its lowest level since late 2022 and signals a new dynamic in energy markets.

According to one source,

The global energy market is currently exhibiting a fascinating divergence as natural gas prices climb steadily, fueled by anticipated colder weather and unprecedented liquefied natural gas (LNG) export demand. This upward trajectory for natural gas stands in stark contrast to the more subdued performance of crude oil prices and the broader energy stock sector, which appears to be taking a breather amidst concerns of a potential supply glut. This immediate implication suggests a shift in profitability within the energy sector, favoring natural gas producers and LNG exporters, while traditional oil companies face ongoing investor scrutiny…

Analysts project natural gas to trade at $4.28 USD/MMBtu by the end of the current quarter and $5.14 within the next 12 months…

Companies heavily invested in natural gas production and particularly those with significant LNG export capabilities are poised for substantial gains. Firms like Cheniere Energy (NYSE:LNG), a leading U.S. LNG exporter, are likely to see improved revenues and profitability due to the robust demand from Europe and Asia and the rising prices. Other major natural gas producers such as EQT Corporation (NYSE:EQT) and Chesapeake Energy (NASDAQ:CHK) could also benefit significantly from the increased natural gas prices and sustained demand…

The robust demand for natural gas, particularly US LNG, underscores its role as a crucial transition fuel and a geopolitical tool for energy security, especially for Europe and Asia seeking to diversify away from less reliable sources. This trend reinforces the strategic importance of developing and expanding LNG export infrastructure, potentially driving significant investment in terminals, pipelines, and liquefaction facilities over the coming years.

In that vein, China has reportedly expressed interest in buying natural gas from a proposed export facility in Alaska.

China has “agreed that they will begin the process of purchasing American Energy,” President Trump wrote on Truth Social following a meeting with Chinese President Xi Jinping in South Korea. “In fact, a very large-scale transaction may take place concerning the purchase of Oil and Gas from the Great State of Alaska.”

According to E&ENews by Politico, Chinese investment in the proposed Alaska gas development could help bring to fruition a $44 billion project that has barely progressed since it was first pitched more than a decade ago. The project’s backers have struggled to sign the long-term supply contracts needed to start building the export plant they’ve planned for the state’s south coast and the pipeline required to bring it gas from Alaska’s North Slope. The Trump administration has heavily boosted Alaska LNG, calling it necessary for national security.

By Andrew Toph for Oilprice.com

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