U.S. natural gas futures were little changed on Thursday as the market waited for direction from a federal report expected to show a much bigger-than-usual storage draw last week.
The lack of price movements came despite the bearish slow return of U.S. production from cold weather-related reductions earlier this month and bullish forecasts for colder weather and higher heating demand than previously expected over the next two weeks.
The U.S. gas market seemed to keep ignoring what was happening in European gas markets, even though higher gas prices around the world have kept U.S. liquefied natural gas (LNG) exports near record highs.
Gas prices in Europe gained about 4% on Thursday due in part to supply concerns related to ongoing tensions between Russia and Ukraine.
Over the past month or so, the United States has worked with other nations to ensure that gas supplies — mostly from liquefied natural gas (LNG) — would keep flowing to Europe in case Russia cuts off exports to the rest of the continent.
The United States and Europe have said they would sanction Russia if it invaded Ukraine, likely prompting Russia to cut some gas exports to Europe.
Russia provides around 30-40% of Europe’s gas supplies, totaling about 16.3 billion cubic feet per day (bcfd) in 2021.
Since the start of the year however the U.S. gas market has focused more on changes in U.S. weather, domestic supply and demand than world events.
So far in 2022, U.S. gas followed European prices only about a third of the time, versus two-thirds in the fourth quarter.
In the United States, analysts forecast utilities pulled a massive 193 billion cubic feet (bcf) of gas from storage during the week ended Feb. 11 due in part to near record LNG exports.
That compares with a decline of 227 bcf in the same week last year and a five-year (2017-2021) average decline of 154 bcf.
If correct, last week’s withdrawal would cut stockpiles to 1.908 trillion cubic feet (tcf), or 11.7% below the five-year average of 2.162 tcf for this time of the year.
After weeks of near record volatility, front-month gas futures for March delivery were down 1.5 cents, or 0.3%, at $4.702 per million British thermal units (mmBtu) at 8:21 a.m. EST (1321 GMT). On Wednesday, the contract closed at its highest since Feb. 3.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states had fallen from a record 97.3 bcfd in December to 94.0 bcfd in January and 92.8 bcfd so far in February, as cold weather froze oil and gas wells in several producing regions.
But on a daily basis, gas production has gained almost every day since dropping to 86.3 bcfd during a Feb. 4 winter storm, reaching a high of 95.2 bcfd on Feb. 11, the most since Jan. 1. Output on Thursday was on track to hold at a preliminary 94.2 bcfd.
With colder weather expected, Refinitiv projected average U.S. gas demand, including exports, would rise from 121.8 bcfd this week to 123.7 bcfd next week. The forecast for next week was higher than Refinitiv’s outlook on Wednesday.
Gas flowing to U.S. LNG export plants has risen to an average of 12.7 bcfd so far in February, which would top January’s monthly record of 12.4 bcfd.