U.S. natural gas futures slid about 3% to a two-week low on Wednesday on forecasts for demand to drop and output to rise once the weather turns warmer than normal in late January.
Also weighing on prices, the amount of gas flowing to U.S. liquefied natural gas (LNG) export plants dropped on Tuesday to a one-year low as some energy firms likely sold their gas into the domestic market after extreme cold this week boosted U.S. power gas prices to multi-year highs in several regions.
That extreme cold also cut gas supplies by freezing wells and increased daily gas demand to a record high on Tuesday.
Front-month gas futures NGc1 for February delivery on the New York Mercantile Exchange fell 8.2 cents, or 2.8%, to $2.818 per million British thermal units (mmBtu) by 10:37 a.m. EST (1537 GMT), putting the contract on track for its lowest close since Jan. 3.
As the extreme cold moves into the U.S. Northeast, spot power and gas prices in New York EL-PK-NYZG-SNL, NG-CG-NY-SNL and New England jumped to their highest since February 2023.
SUPPLY AND DEMAND
Financial company LSEG said average gas output in the Lower 48 states fell to 103.2 billion cubic feet per day (bcfd) so far in January from a monthly record of 108.0 bcfd in December.
On a daily basis, U.S. gas output fell by 17.0 bcfd from Jan. 8-16 to a 12-month low of 90.6 bcfd on Tuesday. That drop was still smaller than losses of 19.6 bcfd during Winter Storm Elliott in December 2022 and 20.4 bcfd during the February freeze in 2021.
Meteorologists projected temperatures in the Lower 48 states would switch from colder than normal from Jan. 17-21 to mostly warmer than normal from Jan. 22-Feb. 1.
With warmer weather coming, LSEG forecast U.S. gas demand in the Lower 48, including exports, would drop from 154.2 bcfd this week to 140.7 bcfd next week. The forecast for next week was higher than LSEG’s outlook on Tuesday.
On a daily basis, LSEG said total gas demand, including exports, soared to 167.8 bcfd on Tuesday. That was lower than LSEG forecast on Tuesday but still topped the all-time high of 162.5 bcfd set on Dec. 23, 2022, during Winter Storm Elliott, according to federal energy data from S&P Global Commodities Insights.
Gas flows to the seven big U.S. LNG export plants fell to an average of 14.1 bcfd so far in January from a monthly record of 14.7 bcfd in December.
On a daily basis, however, LNG feedgas dropped to a one-year low of 9.6 bcfd on Tuesday due mostly to reductions at U.S. energy company Cheniere Energy’s LNG.A Sabine Pass in Louisiana and Corpus Christi in Texas, Freeport LNG’s plant in Texas and Cameron LNG’s plant in Louisiana.
With next-day prices at the Henry Hub NG-W-HH-SNL in Louisiana soaring to a 22-month high of $13 per mmBtu earlier this week, some analysts said energy firms likely sold gas supplies into the U.S. spot market rather than liquefy it for sale overseas.
They said that was especially likely with global gas trading at a five-month low of around $9 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe TRNLTTFMc1 and a seven-month low of $10 at the Japan Korea Marker (JKM) in Asia JKMc1.
Source: Reuters (Reporting by Scott DiSavino; Editing by Kirsten Donovan)