U.S. natural gas futures rose more than 5% on Thursday on a technical rebound and forecasts for slightly colder weather over the next two weeks.
Front-month gas futures for March delivery on the New York Mercantile Exchange (NYMEX) were up 12.2 cents, or 5.6%, to $2.30 per million British thermal units (mmBtu) by 09:32 a.m. EST (1432 GMT), after falling to multi-month low in the previous session.
“The natural gas seemed to achieve its technical destiny. The reason why prices turning back up is because the market got extremely oversold,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.
“All the bearish situation has been played out in the market and now people are looking at the fact that this drop in price is going probably (to) impact future production.”
That price increase came ahead of a federal report expected to show last week’s storage withdrawal was lower than usual as milder weather lead to lower heating demand for the fuel.
Analysts forecast U.S. utilities pulled just 67 billion cubic feet (bcf) of gas from storage during the week ended Feb. 17. That compares with a decrease of 138 bcf in the same week last year and a five-year (2018-2022) average decline of 177 bcf.
If correct, last week’s decrease would cut stockpiles to 2.199 trillion cubic feet (tcf), or 15.4% above the five-year average.
Meanwhile, data provider Refinitiv estimated 347 heating degree days (HDDs) over the next two weeks in the lower 48 U.S. states. The normal for this time of year is 346 HDDs.
HDDs estimate demand to heat homes and businesses by measuring the number of degrees a day’s average temperature is below 65 degrees Fahrenheit (18 degrees Celsius).
Refinitiv said average gas output in the U.S. Lower 48 states fell from 98.3 bcfd in January to 97.4 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.
“A mild winter in Europe and Asia subdued demand,” analysts at ANZ research wrote in a note adding that, “China’s reopening also occurred during a seasonally weak period for natural gas consumption.”
“The current pullback in LNG prices is expected to be short-lived… as it prepares for the next heating season.”
U.S. natural gas futures on Wednesday briefly dipped below $2 per mmBtu for the first time since September 2020, signalling a bonanza for gas consumers while pressuring producers.
Henry hub prices have remained under pressure despite the imminent restart of exports from Freeport LNG’s plant in Texas. Freeport LNG, when operating at full power, can turn about 2.1 bcfd of gas into LNG for export.
Energy regulators and analysts, however, have said they do not expect Freeport LNG to return to full commercial operation until mid-March or later.