U.S. natural gas futures slipped on Wednesday as forecasts for less cold weather than previously feared lowered demand expectations for heating, while robust production levels further weighed on the market.
Front-month gas futures for January delivery fell 30.5 cents, or 4.2%, to settle at $6.930 per million British thermal units, having dropped over 5% earlier to a session low of $6.806.
“The forecasts appear to be kind of waffling a little bit back and forth on some cold weather expected around the corner, but we just don’t know when it’s going to show up,” said Thomas Saal, senior vice president for energy at StoneX Financial Inc.
Data provider Refinitiv forecast 406 heating degree days (HDDs), which are used to estimate demand to heat homes and businesses, over the next two weeks in the Lower 48 U.S. states, is slightly lower than the outlook on Tuesday.
“For now, the near-term temperature outlook isn’t intensely cold enough to spark any concerns about a widening of the storage deficit,” analysts at energy consulting firm Gelber & Associates said in a note
Refinitiv said average gas output in the U.S. Lower 48 states has risen to 99.6 bcfd in November, up from 99.4 bcfd in October.
“Production remains on the upswing with a record pace still on the table in providing an upside price limiter,” energy consulting firm Ritterbusch and Associates said in a note.
However, U.S. gas futures ended the month over 9% higher. Prices are also up about 90% so far this year as much higher global prices feed demand for U.S. exports due to supply disruptions and sanctions linked to Russia’s invasion of Ukraine.
Meanwhile, Freeport LNG has said it plans to start producing LNG again in mid-December and reach full capacity of about 2.1 billion cubic feet per day (bcfd) in March.
Freeport LNG, however, has not yet submitted a request to restart the plant to the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA), sources familiar with the company’s filings have told Reuters.
The plant was shut on June 8 due to an explosion caused by inadequate operating and testing procedures, human error and fatigue, according to a report by consultants hired by the company to review the incident and propose corrective actions.