U.S. natural gas futures rose about 4% on Monday from a one-year low in the prior session with a jump in oil futures and forecasts for slightly more heating demand next week than previously expected.
Oil futures rose more than 3% after China’s move to reopen its borders boosted the outlook for fuel demand and overshadowed global recession concerns.
Front-month gas futures for February delivery rose 14.5 cents, or 3.95%, to $3.855 per million British thermal units (mmBtu) at 8:48 a.m. EST (1348 GMT). On Friday, the contract closed at its lowest since Dec. 30, 2021.
That keeps the gas contract in technically oversold territory, with a relative strength index (RSI) below 30 for an eighth day in a row for the first time since February 2018.
After posting its worst start to a year on record, U.S. gas futures were still down about 14% so far this year after rising 20% in 2022.
That gas price drop caused gas speculators last week to boost their net short futures and options positions on the New York Mercantile and Intercontinental Exchanges for a third week in a row to their highest since October 2022, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.
In the spot market, meanwhile, next-day gas for Monday at the U.S. Henry Hub benchmark in Louisiana fell to $3.43 per mmBtu, its lowest since December 2021.
Traders said the market’s biggest uncertainty remains when Freeport LNG will restart its liquefied natural gas (LNG) export plant in Texas.
After several delays from October to November and then to December, Freeport now expects the facility to return in the second half of January, pending regulatory approvals.
Analysts have long been saying that Freeport would likely return during the first or second quarter of 2023 because the company still has a lot of work to do to satisfy federal regulators, including training staff in new procedures, before restarting the plant.
Whenever Freeport returns, U.S. demand for gas will jump. The plant can turn about 2.1 billion cubic feet per day (bcfd) of gas into LNG, which is about 2% of U.S. daily production.
Freeport shut on June 8 after a pipe failure caused an explosion due to inadequate operating and testing procedures, and human error and fatigue, according to a report by consultants hired to review the incident and suggest corrective actions.
Several vessels, including Prism Diversity, Prism Courage, Prism Agility and Elisa Larus, have been waiting in the Gulf of Mexico to pick up LNG from Freeport, some since early November.
Other ships were sailing toward the plant, including Corcovado LNG, which is expected to arrive in mid-January, and Prism Brilliance, Kmarin Diamond and Wilforce expected in late January.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 98.3 bcfd so far in January, up from 96.7 bcfd in December. That compares with a monthly record of 99.9 bcfd in November 2022.
With the weather expected to remain warmer-than-normal through late January, Refinitiv projected average U.S. gas demand, including exports, would ease from 121.2 bcfd this week to 120.7 bcfd next week. The forecast for this week was lower than Refinitiv’s outlook on Friday, while its forecast for next week was higher.
The average amount of gas flowing to U.S. LNG export plants rose to 12.1 bcfd so far in January, up from 11.9 bcfd in December. That compares with a monthly record of 12.9 bcfd in March 2022.