US natgas prices jump 4% ahead of expiration on colder forecasts

Oct 27 (Reuters) - U.S. natural gas futures climbed about 4% to a two-week high on contract expiration volatility and forecasts for colder weather and higher heating demand over the next two weeks than previously expected. Traders noted gas prices also gained some support from the rest of the energy complex with crude futures up about $2 a barrel earlier in the session on worries about escalating Middle East conflict. On its last day as the front-month, gas futures for November delivery on the New York Mercantile Exchange rose 11.2 cents, or 3.5%, to $3.326 per million British thermal units (mmBtu) at 9:16 a.m. EDT (1316 GMT), putting the contract on track for its highest close since Oct. 12. That put the contract up for a fifth day in a row and pushed it into technically overbought territory, with a relative strength index (RSI) above 70, for the first time since mid October. Front-month prices are often extremely volatile ahead of expiration - November futures jumped by about 7% on Thursday and were up over 5% earlier on Friday - due in part to low volumes. There were only 1,759 November futures traded so far on Friday, down from an average of 129,500 front-month contracts traded daily since the start of the year. Futures for December, which will soon be the front-month, were up about 4% to $3.60 per mmBtu. For the week, the front-month was up about 14% after falling about 10% last week. That would be the biggest weekly gain since it rose about 17% in mid June. SUPPLY AND DEMAND Financial firm LSEG said average gas output in the Lower 48 U.S. states rose to an average of 103.9 billion cubic feet per day (bcfd) so far in October, up from 102.6 bcfd in September and a record high of 103.1 bcfd in July. Meteorologists forecast the weather would turn from warmer than normal now to colder than normal from Oct. 29-Nov. 2 before becoming mostly near normal from Nov. 3-11. Next week will be extremely cold in some parts of the country like Denver where AccuWeather meteorologists forecast Sunday will be snowy with a high of just 26 degrees Fahrenheit (minus 3 Celsius). That compares with a normal high of 63 F (17 C)in Denver at this time of year. LSEG forecast U.S. gas demand in the Lower 48 states, including exports, would jump from 97.6 bcfd this week to 108.2 bcfd next week as cold weather boosts heating demand before sliding to 107.3 bcfd in two weeks with the return of milder, but still seasonally cool, weather. The forecast for next week was higher than LSEG's outlook on Thursday. Pipeline exports to Mexico slid to an average of 6.9 bcfd so far in October, down from a monthly record high of 7.2 bcfd in September. Analysts, however, expect exports to Mexico to rise in coming months once U.S. energy company New Fortress Energy's plant in Altamira starts pulling in U.S. gas to turn into liquefied natural gas (LNG) for export in November. Gas flows to the seven big U.S. LNG export plants rose to 13.6 bcfd so far in October, up from 12.6 bcfd in September but still below April's record high of 14.0 bcfd. The U.S. is on track to become the world's biggest LNG supplier in 2023, ahead of recent leaders Australia and Qatar. Much higher global prices have fed demand for U.S. exports due in part to supply disruptions and sanctions linked to the war in Ukraine. Gas was trading around $16 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe and $18 at the Japan Korea Marker (JKM) in Asia. Week ended Week ended Year ago Five-year Oct 27 Oct 20 Oct 27 average Forecast Actual Oct 27 U.S. weekly natgas storage change (bcf): 81 74 99 57 U.S. total natgas in storage (bcf): 3,781 3,700 3,486 3,574 U.S. total storage versus 5-year average 5.8% 5.2% Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five Year Last Year Average Average 2022 (2017-2021) Henry Hub 3.35 3.21 6.08 6.54 2.89 Title Transfer Facility (TTF) 15.87 15.60 38.37 40.50 7.49 Japan Korea Marker (JKM) 17.91 17.96 32.98 34.11 8.95 LSEG Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days Two-Week Total Forecast Current Day Prior Day Prior Year 10-Year 30-Year Norm Norm U.S. GFS HDDs 235 209 124 184 213 U.S. GFS CDDs 25 26 25 29 21 U.S. GFS TDDs 260 235 149 203 234 LSEG U.S. Weekly GFS Supply and Demand Forecasts Prior Week Current Week Next Week This Week Five-Year Last Year Average For Month U.S. Supply (bcfd) U.S. Lower 48 Dry Production 104.5 104.7 104.5 99.4 93.1 U.S. Imports from Canada 6.9 6.6 6.4 8.2 7.8 U.S. LNG Imports 0.0 0.0 0.0 0.0 0.1 Total U.S. Supply 111.5 111.3 110.9 107.6 101.0 U.S. Demand (bcfd) U.S. Exports to Canada 1.4 1.5 1.5 2.4 2.2 U.S. Exports to Mexico 6.7 6.7 7.0 5.5 5.6 U.S. LNG Exports 14.2 13.7 13.7 11.5 7.1 U.S. Commercial 6.8 6.6 10.2 7.8 7.0 U.S. Residential 7.8 7.4 14.5 9.9 7.5 U.S. Power Plant 30.5 32.3 29.8 28.3 30.1 U.S. Industrial 22.6 22.1 23.9 22.7 22.1 U.S. Plant Fuel 5.2 5.2 5.2 5.2 5.1 U.S. Pipe Distribution 2.0 2.0 2.3 2.0 2.0 U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1 Total U.S. Consumption 75.0 75.7 86.0 76.0 73.9 Total U.S. Demand 97.4 97.6 108.2 95.4 88.8 U.S. Northwest River Forecast Center (NWRFC) at The Dalles Dam Current Day Prior Day % 2023 2022 2021 % of Normal of Normal % of Normal % of Normal % of Normal Forecast Forecast Actual Actual Actual Apr-Sep 91 92 83 107 81 Jan-Jul 89 89 77 102 79 Oct-Sep 89 89 76 103 81 U.S. weekly power generation percent by fuel - EIA Week ended Week ended Week ended Week ended Week ended Oct 27 Oct 20 Oct 13 Oct 6 Sep 29 Wind 14 10 10 11 8 Solar 4 4 4 4 4 Hydro 5 5 5 5 5 Other 2 2 2 2 2 Petroleum 0 0 0 0 0 Natural Gas 40 42 41 42 44 Coal 16 17 16 16 17 Nuclear 19 20 21 19 20 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu) Hub Current Day Prior Day Henry Hub 2.87 2.86 Transco Z6 New York 1.02 1.23 PG&E Citygate 6.87 7.73 Eastern Gas (old Dominion South) 1.08 1.12 Chicago Citygate 2.38 2.04 Algonquin Citygate 1.23 1.27 SoCal Citygate 5.26 5.19 Waha Hub 0.90 1.22 AECO 1.74 1.79 SNL U.S. Power Next-Day Prices ($ per megawatt-hour) Hub Current Day New England 36.25 38.50 PJM West 47.00 35.75 Ercot North 70.00 35.25 Mid C 253.33 240.00 Palo Verde 51.25 42.25 SP-15 45.00 43.50 (Reporting by Scott DiSavino; editing by Jonathan Oatis)