U.S. natural gas futures fell about 2% on Tuesday from a one-month high in the prior session on forecasts for warmer weather and lower heating demand over the next two weeks than previously expected.
That price decline occurred despite a drop in gas output this month and an increase in the amount of gas flowing to liquefied natural gas (LNG) export plants as Freeport LNG’s export plant in Texas slowly returns to service after shutting in a fire in June 2022.
Freeport LNG, the second-biggest U.S. LNG export plant, was on track to pull in about 0.8 billion cubic feet per day (bcfd) of gas from pipelines for a third day in a row on Tuesday, according to data provider Refinitiv.
When operating at full power, Freeport LNG can turn about 2.1 bcfd of gas into LNG for export.
Freeport LNG said last week that the plant could be consuming about 2.0 bcfd of feedgas “over the next several weeks.” Some analysts, however, have said Freeport LNG will likely not return to full capacity until the end of April.
Federal regulators have approved the restart of two of Freeport LNG’s three liquefaction trains (Trains 2 and 3). Liquefaction trains turn gas into LNG. On Monday, Freeport LNG asked regulators for permission to restart the third liquefaction train (Train 1).
The total amount of gas flowing to all of the big U.S. LNG export plants has jumped to 12.8 bcfd so far in February from 12.3 bcfd in January. That is just shy of the monthly record of 12.9 bcfd set in March 2022 before Freeport LNG shut.
The seven big U.S. LNG export plants, including Freeport LNG, can turn about 13.8 bcfd of gas into LNG.
Front-month gas futures for April delivery were down 4.9 cents, or 1.8%, to $2.682 per million British thermal units at 9:26 a.m. EST (1426 GMT). On Monday, the contract closed at its highest price since Jan. 27.
The front-month was on track to slip about 1% in February after plunging 40% in January and 35% in December. That would be the first time the contract has declined for three months in a row since December 2021.
SUPPLY AND DEMAND
Refinitiv said average gas output in the U.S. Lower 48 states has dropped to 97.5 bcfd so far in February from 98.3 bcfd in January. That compares with a monthly record of 99.8 bcfd in November 2022.
Analysts blamed the production decline on the recent drop in gas prices that caused several energy firms to reduce drilling for gas. In addition, extreme cold earlier in February also cut gas output by freezing oil and gas wells in several producing basins.
Meteorologists forecast the weather across the Lower 48 states would remain mostly colder than normal through March 15 after some warmer-than-normal days from Feb. 28 to March 2.
Even with colder weather coming, Refinitiv forecast U.S. gas demand, including exports, would ease from 120.4 bcfd this week to 119.6 bcfd next week mostly on expectations that power generators would burn less gas to produce electricity next week.
Those weekly demand forecasts were lower than Refinitiv’s outlook on Monday.
Mostly mild weather has allowed utilities to pull less gas from storage than normal so far this year.
Gas stockpiles were about 15% above their five-year average (2018-2022) in the week ended Feb. 17 and were expected to end up about 20% above normal during the week ended Feb. 24, according to analysts’ estimates.