U.S. natural gas futures slipped less than 2% on Friday as the market takes a break after a couple weeks of extreme volatility on forecasts for less cold and lower heating demand over the next two weeks than previously expected.
Traders said the price decline came even as a massive storm battered much of the country from Texas to New York and cut gas output to its lowest level since 2021’s February freeze.
Last February, Winter Storm Uri killed over 200 people in Texas, caused power and gas prices to soar to record highs in many parts of the country and left millions of homes and businesses without heat and power for days after gas pipes and power plants froze.
This week’s storm, called Winter Storm Landon, is much less severe than Uri. High temperatures during Uri remained below freezing (32 degrees Fahrenheit or zero degrees Celsius) for eight days in a row in the West Texas town of Midland in the Permian oil- and gas-producing shale basin, according to AccuWeather. The normal high in Midland is 64 F at this time of year.
High temperatures during Landon, however, were only expected to remain below freezing for one day and that was Thursday when the mercury reached just 24 F. As for power outages, there were only around 330,000 homes and businesses without service Friday morning from Texas to New York – though the storm was still ongoing.
Front-month gas futures for March delivery fell 8.1 cents, or 1.7%, to $4.807 per million British thermal units at 9:37 a.m. EST (1437 GMT).
That’s a quiet day for the front-month after a couple of extremely volatile weeks when the contract soared by a record 46% on Jan. 27, plunged 26% on Jan. 28, jumped 16% on Feb. 2 and fell 11% on Feb. 3.
For the week, the front-month was on track to rise about 4% after gaining 16% last week.
In the spot market, worries about lower output and higher heating demand from Landon caused next-day gas prices for Thursday to rise to their highest since last year’s February freeze in Texas, Louisiana and Chicago. But prices at those gas hubs declined for Friday after it became clear that Landon was not as powerful a storm as Uri.
In Texas, the Electric Reliability Council of Texas (ERCOT), which manages the power grid for most of the state, cut its forecast for peak electric demand on Friday to around 67,400 megawatts (MW). On Thursday, ERCOT projected that peak demand would reach 74,694 MW on Friday, which would have topped the grid’s winter peak of 69,812 MW set in February 2021.
In the Northeast, meanwhile, where Landon is heading now, frigid weather and high heating demand since the start of 2022 has kept next-day power and gas prices in New York and New England at or near their highest levels since January 2018.
Data provider Refinitiv said output in the U.S. Lower 48 states fell from a record 97.3 billion cubic feet per day (bcfd) in December to 93.9 bcfd in January and 90.8 bcfd so far in this month after wells in several regions froze, including the Permian in Texas and New Mexico, the Bakken in North Dakota and the Appalachia in Pennsylvania, West Virginia and Ohio.
Even though Winter Storm Landon was weaker than Uri, preliminary data from Refinitiv showed Landon was still capable of freezing wells with gas output on track to drop to 88.5 bcfd on Friday. That would be the lowest daily production since last year’s February freeze for a second day in a row.