U.S. natural gas futures fell about 4% to a two-week low on Friday on forecasts for demand to drop and output to rise as the weather turns warmer than normal in late January and early February.
That price drop came even though the amount of gas flowing to U.S. liquefied natural gas (LNG) export plants was rising after it fell to a one-year low during this week’s Arctic freeze, which also boosted daily gas demand to a record high and cut output to a one-year low by freezing wells.
Front-month gas futures NGc1 for February delivery on the New York Mercantile Exchange were down 11 cents, or 4.1%, at $2.587 per million British thermal units (mmBtu) at 9:41 a.m. EST (1441 GMT), putting the contract on track for its lowest close since Jan. 2.
That put the contract down for a fourth day in a row for the first time since November.
For the week, the front-month was down almost 22% after rising about 15% in each of the prior two weeks. This week’s price drop would be its biggest weekly percentage decline since it fell by over 22% in a week in February 2023.
SUPPLY AND DEMAND
Financial company LSEG said average gas output in the Lower 48 states fell to 102.9 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, U.S. gas output was on track to jump 10.3 bcfd over the past three days to a preliminary 100.8 bcfd on Friday after plunging by 17.2 bcfd from Jan. 8-16 to a 12-month low of 90.5 bcfd on Tuesday, due primarily to freeze-offs and other cold weather events.
The drop earlier this week, however, was 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. 19-21 to mostly warmer than normal from Jan. 22-Feb. 3.
With less cold weather in the outlook, LSEG forecast U.S. gas demand in the Lower 48, including exports, would drop from 155.0 bcfd this week to 141.5 bcfd next week and 123.8 bcfd in two weeks. The forecast for this week and next were higher than LSEG’s outlook on Thursday.
On a daily basis, LSEG said total gas demand, including exports, soared to a record 168.4 bcfd on Jan. 16. That was similar to LSEG’s estimate on Thursday and topped the prior 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 13.9 bcfd so far in January, down from a monthly record of 14.7 bcfd in December.
On a daily basis, LNG feedgas was on track to jump about 4.7 bcfd over the last three days to a preliminary 14.0 bcfd on Friday after dropping by 5.8 bcfd from Jan. 13-16 to a one-year low of 9.2 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.
Source: Reuters (Reporting by Scott DiSavino; editing by Jonathan Oatis)