US natural gas futures gained more than 2% on Tuesday to hit a seven-year high as record global gas prices underpinned robust demand for US LNG. The futures for October delivery, which expired on Tuesday, increased by 13.5 cents (2.4%) to $5.841 per MMBtu, the highest settlement since February 2014. Meanwhile, November futures gained about 13 cents to $5.85 per MMBtu.
Asian and European gas prices were about four times over US futures due to strong demand and low inventories ahead of the winter heating season. This is expected to provide traders with incentives to continue buying US LNG. However, the US can only convert about 10% of its gas output into LNG for exports. Market participants said the US LNG capacity is the cap that prevents US gas futures from following European and Asian prices to the moon.
An industry survey by Reuters expects US gas demand, including exports, to increase from 81.8 bcfd this week to 82.8 bcfd next week on rising heating demand. However, the figures were lower than its prior projections due to forecasts for milder weather.
