U.S. natural gas futures slipped on Monday as output slowly recovers from well freeze-offs earlier in January and on forecasts for less cold and lower heating demand next week than previously expected.
That price decline came despite forecasts for more cold and heating use this week and a 17% jump in European gas futures.
Since the start of the year, the U.S. market has focused more on changes in U.S. weather and domestic supply and demand, rather than what is happening around the world. So far in 2022, U.S. gas followed European prices less than half the time versus about two-thirds during the fourth quarter of 2021.
But, traders said demand for U.S. liquefied natural gas (LNG) will remain strong so long as global prices keep trading well above U.S. futures. Global prices were currently about seven times over U.S. futures as utilities around the world scramble for LNG cargoes to replenish low stockpiles in Europe and meet surging demand in Asia.
Front-month gas futures were down 6 cents, or 1.5%, to $3.939 per million British thermal units at 8:57 a.m. EST (1357 GMT).
U.S. speculators last week boosted their net long futures and options positions on the New York Mercantile and Intercontinental Exchanges for a second week in a row with gas demand expected to reach a record high on Jan. 21, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.
In addition to boosting heating demand, the last week’s cold cut gas output to its lowest in four months as wells and other equipment froze in Texas, Pennsylvania and elsewhere. It was a reminder of the last time gas demand was expected to reach record highs before last February’s freeze.
During the February freeze, next-day gas jumped to record highs in several parts of the country – gaining over 1,100% on Feb. 12 at the Waha hub in West Texas – as a winter storm left millions without power and heat for days after freezing gas wells and pipes in Texas and other U.S. central states.
In the current spot market, frigid weather and high heating demand over the past week in the U.S. Northeast kept next-day power and gas prices in New York and New England at or near their highest since January 2018.
Data provider Refinitiv said output in the U.S. Lower 48 states had averaged 94.3 billion cubic feet per day (bcfd) so far in January, down from a record 97.6 bcfd in December. Production rose a bit over the weekend from the lows seen last week.
With less cold weather forecast, Refinitiv projected average U.S. gas demand, including exports, would drop from 143.2 bcfd this week to 133.9 next week.
On a daily basis, Refinitiv said total U.S. gas demand plus exports hit a preliminary 155.8 bcfd on Jan. 21, which would top the current record of 150.6 bcfd on Jan. 30, 2019.
The amount of gas flowing to U.S. LNG export plants has averaged 12.5 bcfd so far this month, which would top December’s monthly record of 12.2 bcfd.