U.S. natural gas futures dropped about 5% to a two-week low on Friday on forecasts for less cold weather in mid January than previously expected.
That price drop came despite near record gas flows to U.S. liquefied natural gas (LNG) export plants, soaring gas prices in Europe and forecasts for colder-than-normal weather and higher-than-usual heating demand in the U.S. over the next two weeks.
The price move also came ahead of a federal report expected to show utilities pulled a bigger-than-usual 124 billion cubic feet (bcf) of gas out of storage during the week ended Dec. 27.
That compares with a decrease of 35 bcf during the same week last year and a five-year average draw of 104 bcf for this time of year.
Front-month gas futures for February delivery on the New York Mercantile Exchange fell 17.6 cents, or 4.8%, to $3.484 per million British thermal units (mmBtu) at 8:23 a.m. EST (1323 GMT), putting the contract on track for its lowest close since Dec. 18.
That also put the front-month down about 1% for the week after losing about 6% last week.
In the spot market, meanwhile, frigid weather moving across parts of the U.S. boosted next-day prices to their highest since January 2024 at the Henry Hub benchmark (NG-W-HH-SNL) in Louisiana, the Eastern Gas hub in Pennsylvania (NG-PCN-APP-SNL) and in Chicago (NG-CG-CH-SNL).
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states rose to 105.0 billion cubic feet per day (bcfd) so far in January, up from 103.8 bcfd in December. That compares with a record 105.3 bcfd in December 2023.
Meteorologists projected weather in the Lower 48 states would remain mostly colder than normal through Jan. 15 before turning near normal from Jan. 16-18.
With colder weather coming, LSEG forecast average gas demand in the Lower 48, including exports, would jump from 119.5 bcfd this week to 146.3 bcfd next week before easing to 145.0 bcfd in two weeks. The forecast for next week was higher than LSEG’s outlook on Thursday.
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, LNG feedgas was on track to reach a record 15.200 bcfd on Friday with flows to Venture Global’s 2.6-bcfd Plaquemines plant under construction in Louisiana headed for a record 0.660 bcfd, according to LSEG.
That compares with the current daily all-time high of 15.195 bcfd in December 2023.
Despite increases over the past month, LNG feedgas – the fastest growing source of U.S. gas demand growth in recent years – eased to 13.07 bcfd in 2024 from 13.09 bcfd in 2023, the first annual decline since the country started exporting LNG from the Lower 48 states in 2016.
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 at a 13-month high of around $15 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe (TRNLTTFMc1) due to cold weather and the expiration of a deal at the end of 2024 that allowed Russia to pipe gas to Europe across Ukraine.
Source: Reuters