U.S. natural gas futures eased about 1% on Thursday after forecasts weather over the next two weeks would not be quite as cold as previously expected, and as the market anticipated less disruption from frozen wells.
Front-month gas futures for February delivery on the New York Mercantile Exchange fell 3.1 cents, or 0.9%, to $3.620 per million British thermal units (mmBtu) at 8:31 a.m. EST (1331 GMT).
As the market pauses following an extremely volatile couple of weeks, analysts said price spikes were still possible since the coldest weather forecast was still to come early next week. That cold could boost gas supply curtailments from freezing wells and pipes, known in the industry as freeze-offs.
During the price swings of the last couple of weeks, nine of the last 10 trading days saw moves up or down of more than 5%. That compares with an average daily price move of around 3.7% in calendar 2024.
Analysts projected the next three storage reports for the weeks ended Jan. 10, 17 and 24 could show utilities pulling over 200 billion cubic feet of gas each week out of inventories due to extreme cold expected to last through at least late January.
Those storage withdrawals could wipe out the current surplus of gas in storage, which stands near 7% over the five-year average, by the end of January. If correct, that would be the first time stockpiles fall below the five-year average since January 2022.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states slid to 102.8 billion cubic feet per day (bcfd) so far in January, down from 103.8 bcfd in December. That compares with a record 105.3 bcfd in December 2023.
Since daily output hit a 10-month high of 106.0 bcfd on Dec. 30, supplies were on track to drop by around 6.2 bcfd to a preliminary eight-week low of 99.9 bcfd on Thursday due mostly to freezing wells. That projected amount of freeze-offs was the same as on Wednesday.
Output declines so far this year have been much smaller than previous winters. In past winters, freeze-offs cut gas output by around 16.5 bcfd from Jan. 8-16 in 2024, 19.4 bcfd from Dec. 21-24 in 2022 and 20.4 bcfd from Feb. 8-17 in 2021, according to LSEG data.
Meteorologists projected weather in the Lower 48 states would remain mostly colder than normal through Jan. 24, with the coldest days now expected early next week.
LSEG forecast average gas demand in the Lower 48, including exports, would hold around 147.8 bcfd this week and next. The forecast for this week was higher than LSEG’s outlook on Wednesday.
On a daily basis, LSEG projected total gas use so far this winter peaked at 158.2 bcfd on Jan. 8. That fell short of the 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.
Source: Reuters