U.S. natural gas futures slid about 2% on Wednesday on forecasts for lower demand than previously expected over the next two weeks.
That price decline came despite forecasts for colder weather in late February, an increase in the amount of gas going to U.S. liquefied natural gas (LNG) export plants to an eight-month high, and a decline in gas output so far this month.
Front-month gas futures for March delivery fell 3.8 cents, or 1.5%, to $2.529 per million British thermal units (mmBtu) by 8:04 a.m. EST (1304 GMT).
On Tuesday, the contract closed at its highest since Feb. 7.
The amount of gas flowing to U.S. LNG export plants was on track to reach 13.2 billion cubic feet per day (bcfd) on Wednesday, the highest since May 2022, due to a rapid increase in flows to Freeport LNG’s export plant in Texas as the facility prepares to exit an eight-month outage caused by a fire in June 2022.
Freeport LNG, the second-biggest U.S. LNG export plant, was on track to pull in 0.5 bcfd of gas from pipelines for a third day in an row on Wednesday, according to data provider Refinitiv. When operating at full power, Freeport LNG can turn about 2.1 bcfd of gas into LNG for export.
Earlier this week, Freeport LNG asked federal regulators for permission to put the first phase of its restart plan into commercial operation. Phase 1 includes the full operation of the plant’s three liquefaction trains, which turn gas into LNG, two storage tanks and one LNG loading dock.
Energy regulators and analysts, however, have said they do not expect Freeport LNG to return to full commercial operation until mid-March or later.
A couple of Freeport LNG’s customers – Japan’s JERA and Osaka Gas – have said they do not expect to get LNG from the plant until after March.
Federal regulators approved the restart of Freeport LNG liquefaction Train 3 but have not authorized the facility to commence liquefaction operations. Freeport LNG still needs permission from regulators to place new LNG in the tanks and transfer it to ships.
The LNG loaded on to ships from Freeport LNG over the past several days is old LNG that was already in the tanks. A third vessel, LNG Rosenrot, arrived at the plant over the past 24 hours, according to Refinitiv ship tracking data.
U.S. GAS OUTPUT
Refinitiv said average gas output in the U.S. Lower 48 states fell from 98.3 bcfd in January to 97.0 bcfd so far in February, after extreme cold earlier in February froze oil and gas wells in several producing basins. That compared with a monthly record of 99.8 bcfd in November 2022.
Meteorologists forecast the weather would remain mostly near normal through March 2 except for several cold days around Feb. 17-18 and Feb. 23-March 1.
With colder weather coming, Refinitiv forecast U.S. gas demand, including exports, would rise from 117.6 bcfd this week to 122.3 bcfd next week. Those forecasts, however, were lower than Refinitiv’s outlook on Tuesday.
With the amount of gas flowing to Freeport LNG rising, the average amount of feedgas going to all seven big U.S. LNG export plants climbed to 12.8 bcfd so far in February, up from 12.3 bcfd in January. That compares with a monthly record of 12.9 bcfd in March 2022 before Freeport LNG shut.
The seven big U.S. export plants, including Freeport LNG, can turn about 13.8 bcfd of gas into LNG.