U.S. natural gas futures slid about 3% on Friday on forecasts for milder weather over the next two weeks than previously expected and a recent drop in gas flows to liquefied natural gas export plants, due in part to the shutdown and slow return of Freeport LNG’s plant in Texas.
Front-month gas futures for February delivery on the New York Mercantile Exchange were down 11.4 cents, or 2.9%, to $3.831 per million British thermal units (mmBtu) at 8:04 a.m. EST (1304 GMT).
For the week, the contract was down about 3% after easing about 1% last week.
To meet record demand for gas for heat during extreme cold weather this week, analysts projected energy firms pulled about 317 billion cubic feet (bcf) of gas out of storage during the week ended Jan. 24. That would fall short of the record weekly withdrawal of 359 bcf during a freeze in January 2018.
But it would be the biggest weekly storage withdrawal since January 2024 and would erase the small surplus of gas in inventory over the five-year average for the first time since January 2022.
Some analysts said storage withdrawals in January could top the current monthly record high of 994 bcf set in January 2022, according to federal energy data.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states has fallen from 104.2 billion cubic feet per day (bcfd) in December to 101.9 bcfd so far in January, due mostly to freezing oil and gas wells and pipes, known as freeze-offs. That compares with a monthly record of 104.5 bcfd in December 2023.
Freeze-offs from Jan. 18-21 cut output by 6.9 bcfd to a one-year low of 96.9 bcfd on Tuesday. About 5.1 bcfd of that output, however, was already on track to return by Friday.
In past years, freeze-offs cut gas output by roughly 8.1 bcfd from Jan. 9-16 in 2024, 4.6 bcfd from Jan. 31-Feb. 1 in 2023, 15.8 bcfd from Dec. 20-24 in 2022, and 20.4 bcfd from Feb. 8-17 in 2021, according to LSEG data.
Meteorologists projected that weather in the Lower 48 states would remain colder than normal through Jan. 27, before turning mostly near normal from Jan. 28-Feb. 8.
With the milder weather coming, LSEG forecast average gas demand in the Lower 48 states, including exports, would fall from 156.9 bcfd this week to 142.0 bcfd next week and 133.5 bcfd in two weeks. The forecasts for this week and next were similar to LSEG’s outlook on Thursday.
On a daily basis, LSEG said total gas use peaked at 173.3 bcfd on Jan. 20 and 181.3 bcfd on Jan. 21, easily topping the prior daily record high of 168.4 bcfd on Jan. 16, 2024.
The amount of gas flowing to the eight big U.S. LNG export plants has risen to an average of 14.7 bcfd so far in January, up from 14.4 bcfd in December. That compares with a monthly record high of 14.7 bcfd in December 2023.
On a daily basis, however, LNG feedgas was on track to rise to 13.4 bcfd on Friday, up from a nine-month low of 10.6 bcfd on Thursday when Freeport LNG’s 2.1-bcfd export plant in Texas was only pulling in about 0.1 bcfd and Cheniere Energy’s 2.4-bcfd Corpus Christi plant in Texas was only pulling in about 1.0 bcfd, a 33-month low.
Flows to Freeport LNG, which shut due to power issues during a winter storm on Tuesday, were on track to rise to 1.4 bcfd on Friday, up from near zero on Tuesday and Wednesday and 0.1 bcfd on Thursday. That compares with an average of 1.9 bcfd over the prior week.
Source; Reuters