U.S. natural gas futures plunged about 11% to a one-week low on Tuesday on forecasts for demand to drop and output to rise once the weather turns warmer than normal in late January.
Another factor weighing on prices was a drop in the amount of gas flowing to U.S. liquefied natural gas (LNG) export plants to a three-month low on Monday.
That futures price decline came even though spot power and gas prices soared to multi-year highs as extremely cold weather this week cut gas supplies and was on track to boost daily gas demand to a record high on Tuesday.
The futures market is trading for February. Looking ahead to February, analysts said the country should have enough production and gas in storage to meet at least normal weather conditions without boosting prices by much.
Front-month gas futures NGc1 for February delivery on the New York Mercantile Exchange fell 36.1 cents, or 10.9%, to $2.952 per million British thermal units (mmBtu) at 10:24 a.m. (1524 GMT), putting the contract on track for its lowest close since Jan. 5.
That put the front-month on track for its biggest daily percentage drop since March 6, 2023, when it fell by about 15%.
In the spot market, power prices at the Mid-Columbia hub EL-PK-MIDC-SNL in Oregon soared to a record high of $1,075 per megawatt hour.
Next-day gas prices, meanwhile, jumped to $10.40 per mmBtu at the Eastern Gas South hub NG-PCN-APP-SNL in Pennsylvania, their highest since July 2008, and $9.72 at the AECO hub NG-ASH-ALB-SNL in Alberta in Canada, their highest since February 2014.
In other gas markets, next-day prices hit their highest since the February freeze in 2021, including the U.S. Henry Hub NG-W-HH-SNL benchmark in Louisiana at $13.20 per mmBtu, Waha NG-WAH-WTX-SNL in West Texas at $17.23 and Chicago NG-CG-CH-SNL at $23.35.
SUPPLY AND DEMAND
Financial company LSEG said average gas output in the Lower 48 states fell to 103.9 billion cubic feet per day (bcfd) so far in January, down from a monthly record of 108.0 bcfd in December.
On a daily basis, output fell by 14.9 bcfd from Jan. 8-15 to a 12-month low of 92.8 bcfd on Monday.
That output drop, however, was less 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 the weather in the Lower 48 states would switch from colder than normal from Jan. 16-21 to mostly warmer than normal from Jan. 22-31.
With warmer weather coming, LSEG forecast U.S. gas demand in the Lower 48, including exports, would drop from 154.1 bcfd this week to 138.8 bcfd next week. The forecast for this week was lower than LSEG’s outlook on Monday.
On a daily basis, LSEG projected total gas demand, including exports, would reach 170.0 bcfd on Tuesday. That was lower than LSEG forecast on Monday but would still top the current 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 slid to an average of 14.4 bcfd so far in January, down from a monthly record of 14.7 bcfd in December.
On a daily basis, LNG feedgas dropped to a three-month low of 11.7 bcfd on Monday due to mostly to reductions at U.S. energy company Cheniere Energy’s LNG.A Sabine Pass in Louisiana and Freeport LNG’s plant in Texas.
Source: Reuters (Reporting by Scott DiSavino, Editing by Bernadette Baum)