U.S. natural gas futures fell about 6% on Monday as output slowly recovers from last week’s freezing weather and on forecasts for less cold and lower heating demand over the next two weeks than previously expected.
Over the last two weeks, trade in gas futures was the most volatile on record due in part to worries that Winter Storm Landon, which battered the eastern half of the country last week, would cut output and boost heating demand like last February’s Winter Storm Uri.
But Landon – with just one day below freezing in the Wet Texas Permian basin – was much weaker than Uri, which froze West Texas for eight days in a row.
Uri killed more than 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, cutting around 17.4 billion cubic feet per day (bcfd) of gas output.
Landon, meanwhile, left around 400,000 homes and businesses without power from Texas to New York for about a day, boosted power and gas prices to the most since Uri and cut gas output by around 7.2 bcfd.
Front-month gas futures for March delivery on the New York Mercantile Exchange (NYMEX) fell 27.7 cents, or 6.1%, to $4.295 per million British thermal units by 9:19 a.m. EST (1419 GMT), putting the contract on track for its lowest close since Jan. 26 for a second day in a row.
During a period of record volatility for NYMEX futures ahead of Landon, U.S. speculators last week boosted their net long futures and options positions on the NYMEX and Intercontinental Exchanges to the highest since October 2021, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.
Data provider Refinitiv said output in the U.S. Lower 48 states fell from a record 97.3 bcfd in December to 93.9 bcfd in January and 89.9 bcfd so far in February 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.
With less cold expected, Refinitiv projected average U.S. gas demand, including exports, would drop from 130.3 bcfd this week to 119.8 bcfd next week. Those forecasts were lower than Refinitiv’s outlook on Friday.
The amount of gas flowing to U.S. liquefied natural gas (LNG) export plants was on track to rise from a monthly record of 12.4 bcfd in January to 12.7 bcfd in February as liquefaction trains at Venture Global LNG’s Calcasieu Pass export plant in Louisiana enter service.
Traders said demand for U.S. LNG will remain strong so long as global gas prices remain well above U.S. futures as utilities around the world scramble for cargoes to meet surging demand in Asia and replenish low stockpiles in Europe – especially with the threat Russia could invade Ukraine and cut gas supplies to Europe.
Russia supplied Europe with about 16.8 bcfd of gas in 2020, representing about 35% to 40% of the continent’s supply, according to analysts and U.S. energy data.