U.S. natural gas futures jumped about 6% on Wednesday on forecasts for cooler weather and higher heating demand over the next two weeks than previously expected and as output remains slow to return after wells and other equipment froze in last week’s Arctic freeze.
That price increase came despite forecasts for the weather to remain warmer than normal through at least early February, which should over time cut gas demand and boost output.
Last week, extreme cold boosted gas demand to a daily record high and cut both gas output and liquefied natural gas (LNG) feedgas to a one-year low.
Front-month gas futures NGc1 for February delivery on the New York Mercantile Exchange rose 14.7 cents, or 6.0%, to $2.597 per million British thermal units (mmBtu) at 9:29 a.m. EST (1429 GMT).
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 by 13.2 bcfd from Jan. 17-24 to a preliminary one-week high of 103.7 bcfd on Wednesday. That, however, is not enough to make up for the 17.2 bcfd drop in output from Jan. 8-16 to a 12-month low of 90.5 bcfd on Jan. 16, due primarily to freeze-offs and other cold weather events.
Meteorologists projected temperatures in the Lower 48 states would remain warmer than normal from now through at least Feb. 8.
With less frigid temperatures coming, LSEG forecast U.S. gas demand in the Lower 48, including exports, would drop from 144.7 bcfd this week to 124.7 bcfd next week. Those forecasts were higher than LSEG’s outlook on Tuesday. That compares with a daily record demand of 168.4 bcfd on Jan. 16 during the Arctic freeze.
U.S. pipeline exports to Mexico rose to an average of 5.8 bcfd so far in January, up from 4.7 bcfd in December but remained well below the monthly record of 7.0 bcfd in August.
Analysts expect exports to Mexico to rise in the coming months once U.S.-based New Fortress Energy’s NFE.O LNG export plant in Altamira in Mexico starts pulling in U.S. gas to liquefy for export.
Gas flows to the seven big U.S. LNG export plants fell to an average of 13.8 bcfd so far in January, down from a monthly record of 14.7 bcfd in December.
But on a daily basis, LNG feedgas was on track to rise by about 4.4 bcfd from Jan. 17-24 to a preliminary 13.6 bcfd on Wednesday after dropping by 5.8 bcfd from Jan. 13-16 to a one-year low of 9.2 bcfd on Jan. 16 during last week’s freeze.
Energy analysts said part of the reason LNG feedgas has not returned to record levels is that liquefaction trains at Freeport LNG’s export plant in Texas have shut at least three times so far this year. Freeport Train 2 shut on Jan. 16 and Jan. 22, and Train 3 shut on Jan. 17, according to company filings with Texas environmental regulators.
In addition, train 3 at U.S. energy company Cheniere Energy’s LNG.A Corpus Christi LNG export plant in Texas also shut on Jan. 22, according to company filings with state environmental regulators.
Source: Reuters (Reporting by Scott DiSavino; editing by David Evans)