U.S. natural gas futures eased about 1% on Thursday on forecasts for milder weather and lower heating demand next week than previously expected.
That small price decline was offset by forecasts for cooler weather in mid-February that should boost heating demand again, and a massive, bigger-than-expected storage withdrawal during extreme cold last week.
The U.S. Energy Information Administration (EIA) said utilities pulled 321 billion cubic feet (bcf) of gas out of storage during the week ended Jan. 24.
That was bigger than the 314-bcf withdrawal analysts forecast in a Reuters poll and compares with a drop of 234 bcf during the same week last year and a five-year average draw of 189 bcf for this time of year.
That was also only the fourth time utilities ever pulled over 300 bcf of gas out of storage in a week, but fell short of the record 359 bcf withdrawn during a freezing week in January 2018.
Analysts noted last week’s decline erased the small surplus of gas in storage over the five-year average for the first time since January 2022, and could boost total withdrawals for the month to a record high. The current record monthly storage withdrawal is 994 bcf in January 2022, according to federal energy data.
On its first day as the front-month, gas futures
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for March delivery on the New York Mercantile Exchange fell 2.2 cents, or 0.7%, from where that contract closed on Wednesday to $3.148 per million British thermal units (mmBtu) at 10:35 a.m. EST (1535 GMT).
The contract, however, was still on track to settle at its lowest since Dec. 6 because the new March front-month was still down about 12% from where the higher-priced February contract expired on Wednesday when it was still the front-month.
That 12% drop would be the biggest daily percentage decline since the front-month fell about 17% in January 2024 when the front-month last switched from February to March. The price drop also pushed the contract into technically oversold territory for the first time since October.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states fell from 103.8 billion cubic feet per day (bcfd) in December to 102.3 bcfd so far in January, due mostly to freezing oil and gas wells and pipes, known as freeze-offs. That compares with a monthly record of 104.6 bcfd in December 2023.
Freeze-offs from Jan. 18-21 cut output by 6.9 bcfd to a one-year low of 96.9 bcfd on Jan. 21. All of that curtailed output was back in service by Jan. 29.
Meteorologists projected weather in the Lower 48 states would remain mostly warmer than normal through Feb. 7, before turning mostly near normal from Feb. 8-14.
With mild weather coming, LSEG forecasts average gas demand in the Lower 48 states, including exports, would fall from 136.8 bcfd this week to 124.7 bcfd next week. The forecast for next week was lower than LSEG’s outlook on Wednesday.
On a daily basis, LSEG said total gas use during last week’s extreme cold peaked at 173.3 bcfd on Jan. 20 and 181.2 bcfd on Jan. 21, easily topping the prior daily record high of 168.4 bcfd on Jan. 16, 2024.
The amount of gas flowing to the eight big U.S. liquefied natural gas (LNG) export plants rose to an average of 14.6 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 rise to 14.8 bcfd on Thursday from 14.5 bcfd on Wednesday and 14.0 bcfd on Tuesday.
Most of that LNG feedgas increase came from rising flows to Freeport LNG’s 2.1-bcfd export plant in Texas as the third of three liquefaction trains at the plant returned to service following a shutdown on Jan. 28-29, according to a company report to Texas environmental regulators and LSEG data.
Source: Reuters