U.S. natural gas futures eased about 1% to a fresh one-week low on Wednesday after Freeport LNG’s export plant in Texas shut and on forecasts for less cold weather in late January and early February that should reduce heating demand.
With temperatures across the country averaging their lowest in at least five years on Tuesday, demand for gas hit new daily record highs on Monday and Tuesday while spot power and gas prices rose to multi-year highs in several parts of the country.
Front-month gas futures for February delivery on the New York Mercantile Exchange fell 3.4 cents, or 0.9%, to $3.722 per million British thermal units (mmBtu) at 8:52 a.m. EST (1352 GMT), putting the contract on track for its lowest close since Jan. 9 for a second day in a row.
Analysts projected energy firms would pull over 200 billion cubic feet (bcf) of gas out of storage for a second and third week in a row during the weeks ending Jan. 17 and Jan. 24 to meet soaring heating demand, erasing a 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 fell from 104.2 billion cubic feet per day (bcfd) in December to 102.0 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.
On a daily basis, production was on track to climb by around 1.8 bcfd to a preliminary 99.3 bcfd on Wednesday after freeze-offs caused output to drop by 6.3 bcfd over the prior four days to a one-year low of 97.5 bcfd on Tuesday.
But, freeze-offs so far this winter were relatively small. 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 seasonally cold from Jan. 28 through at least Feb. 6.
Jan. 21 was the coldest day on average across the country in at least five years, according to LSEG weather data going back to 2020.
But with less cold weather coming next week, LSEG forecast average gas demand in the Lower 48 states, including exports, would fall from 153.3 bcfd this week to 142.3 bcfd next week. The forecast for this week was more than LSEG’s outlook on Tuesday, while its forecast for next week was lower.
On a daily basis, LSEG said total gas use peaked at 173.3 bcfd on Jan. 20 and 179.7 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 rose to an average of 15.0 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 dropped by 2.3 bcfd to a six-week low of 13.3 bcfd on Tuesday due mostly to the shutdown of Freeport LNG’s 2.1-bcfd export plant in Texas due to a power feed problem during a rare winter storm along the Gulf Coast.
The U.S. became the world’s biggest LNG supplier in 2023, ahead of recent leaders Australia and Qatar, as much higher global prices feed demand for more exports due in part to supply disruptions and sanctions linked to Russia’s invasion of Ukraine in February 2022.
Gas was trading near 14-month high of around $15 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe (TRNLTTFMc1) due in part to the Freeport outage.
Source: Reuters