U.S. natural gas futures dropped by 8% on Monday on forecasts for less cold weather than previously expected over the next two weeks that will likely reduce heating demand.
Front-month gas futures fell 52.8 cents, or 8%, to $6.072 per million British thermal units (mmBtu) as of 9:20 a.m. ET (1420 GMT), the lowest level since Dec. 9.
“The market is looking beyond the current cold snap and there’s a belief that as cold as it’s going to get, it’s going to be a short-lived polar blast,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.
“And so the market’s already kind of looking beyond where the concerns are about the weather.”
Data provider Refinitiv forecast 423 heating degree days (HDDs), which are used to estimate demand to heat homes and businesses, over the next two weeks in the Lower 48 U.S. states, which is lower than the outlook on Friday.
There’s still uncertainty as to when we’re going to see a restart for Freeport, Flynn added.
Once Freeport returns, demand for gas will jump. The plant can turn about 2.1 billion cubic feet per day (bcfd) of gas into LNG for export, which is about 2% of U.S. daily production.
“A revival of last week’s renewed strength in the dollar and late week selloff in the oil could spill further into the gas space,” energy consulting firm Ritterbusch and Associates said in a note, but added “this doesn’t look like a market ready to post a sustainable advance as the weather factor increasingly becomes the primary driver of price.”
Gas futures were up about 62% so far this year as much higher global prices feed demand for U.S. exports due to supply disruptions and sanctions linked to Russia’s war in Ukraine.
Gas was trading at $32 per mmBtu at the Dutch Title Transfer Facility (TTF) in Europe (TRNLTTFMc1) and $36 at the Japan Korea Marker (JKM) in Asia (JKMc1).
Source: Reuters