US natural gas surges on pipeline restriction, global LNG prices hold firm

London, (Quantum Commodity Intelligence) – US natural gas surged to eight-month highs Friday, as restrictions were announced on a key Texas pipeline for the summer months, while global LNG prices continued to trade at seasonally-high levels.

NYMEX natural gas for July-delivery soared to a high of $3.330/mmBtu before consolidating at $3.315, a gain of $0.15/mmBtu, or nearly 5% on the day and up 10% since the end of May.

Pipeline operator Texas Eastern Transmission Co. (Tetco) announced a 20% pressure reduction, which could reduce supplies until late in the third quarter.

Natural gas prices were already riding ahead the expected summer demand spike, low inventories and higher pipeline exports to Mexico.

Global LNG prices also remained firm ahead of the expected summer demand spike for North Asia and Europe.

In Asian, benchmark JKM futures strengthened to the highest levels since January with July hitting $10.900/mmBtu, while August futures were trading at around $11.700/mmBtu.

"North Asian LNG prices continued a strong run, with supply side issues added to the bullish outlook,' said Daniel Hynes, senior commodity strategist at ANZ.

Power shortages in China's Guangdong province were also underpinning Asian LNG prices, amid firm demand while coal and hydropower production face constraints.

"This is all likely to lead to further strong demand for LNG in coming months," said ANZ's Hynes.

In Europe, benchmark TTF gas was trading at the highest price for the time of year, buoyed by strong demand and lower inventories.

"The EU gas price (TTF, month ahead) is trading at around Euro 29 per MWh, its highest level for this time of year since records began in 2005," said Commerzbank in a note.

Commerzbank noted that EU gas storage facilities are currently 41% full and German facilities only 35% full, which, "historically speaking, this is a very low level for this point in the restocking phase."