U.S. natural gas futures gained about 3% on Thursday on forecasts for colder weather and higher heating demand over the next two weeks than previously expected.
That price decline came ahead of a federal report expected to show a smaller than usual storage decline last week when mild weather kept heating demand low.
Analysts forecast U.S. utilities pulled 31 billion cubic feet (bcf) of gas from storage during the week ended Dec. 2. That compares with a decrease of 59 bcf in the same week last year and a five-year (2017-2021) average decline of 49 bcf.
If correct, last week’s decrease would cut stockpiles to 3.452 trillion cubic feet (tcf), or 1.9% below the five-year average of 3.520 tcf for this time of the year.
The price increase also came despite Freeport LNG’s announcement last week that it plans to delay the restart of its liquefied natural gas (LNG) export plant in Texas from mid-December to the end of the year. That delay should keep LNG exports below record levels hit in March and leave more gas in the United States for domestic use.
Some analysts, moreover, do not expect Freeport to return until January, February or later because it will likely take federal pipeline safety regulators longer than Freeport expects to review and approve the plant’s restart plan once the company submits it.
At least one LNG vessel, Prism Brilliance, seems to have given up on Freeport after the company delayed the planned restart, according to ship tracking data from Refinitiv. The ship was on its way to Jamaica but in the last few hours has turned back toward the Gulf of Mexico.
Two other vessels – Prism Diversity and Prism Courage – meanwhile, were still waiting in the Gulf of Mexico near Freeport to pick up LNG from the plant.
The plant, which can turn about 2.1 billion cubic feet per day (bcfd) of gas into LNG, 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 the company hired to review the incident and suggest corrective actions.
Front-month gas futures for January delivery on the New York Mercantile Exchange rose 18.4 cents, or 3.2%, to $5.907 per million British thermal units (mmBtu) at 8:31 a.m. EST (1331 GMT).
In the spot market, meanwhile, gas prices in California have nearly doubled over the past couple of weeks as freezing weather and snow blankets parts of the state and pipeline outages and constraints limit gas flows from Texas.
In Northern California, next-day gas for Thursday at the PG&E citygate hit its highest since February 2014, while gas at the Southern California Border rose to its highest since February 2021.
The combination of mild weather in Texas and those pipeline constraints and maintenance outages limiting gas flows to California helped cut spot prices at the Waha hub in the Permian basin in West Texas by around 80% over the past week.
U.S. gas futures are up about 58% 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.
Gas was trading at $46 per mmBtu at the Dutch Title Transfer Facility (TTF) in Europe and $33 at the Japan Korea Marker (JKM) in Asia.
With colder weather coming, Refinitiv projected average U.S. gas demand, including exports, would rise from 118.4 bcfd this week to 121.9 bcfd next week. Those forecasts were higher than Refinitiv’s outlook on Wednesday.
The average amount of gas flowing to U.S. LNG export plants held around 11.8 bcfd so far in December, the same as in November. That remains below the monthly record of 12.9 bcfd in March due to the Freeport outage.