U.S. natural gas futures eased about 1% on Thursday from a one-month high in the prior session on rising output and forecasts for less heating demand next week than previously expected.
That price decline came despite a federal report showing a bigger-than-expected storage draw last week and as the amount of gas flowing to U.S. liquefied natural gas (LNG) export plants was on track to hit a record high this month with the continued ramp-up of Freeport LNG’s export plant in Texas.
The U.S. Energy Information Administration (EIA) said utilities pulled 81 billion cubic feet (bcf) of gas from storage during the week ended Feb. 24.
That was more than the 75-bcf decline analysts forecast in a Reuters poll and compares with a decrease of 137 bcf in the same week last year and a five-year (2018-2022) average decline of 134 bcf.
Analysts, however, noted prices were down in part because last week’s withdrawal was still much smaller than the five-year average as mild weather kept heating demand low.
Front-month gas futures for April delivery fell 3.2 cents, or 1.1%, to $2.779 per million British thermal units at 10:58 a.m. EST (1558 GMT). On Wednesday, the contract closed at its highest since Jan. 27 for a third day in a row.
Freeport LNG’s export plant was on track to pull in about 1.2 billion cubic feet per day (bcfd) of gas from pipelines on Thursday, according to data provider Refinitiv, a sign the company likely started the second of three liquefaction trains at the plant. Liquefaction trains turn gas into LNG for export.
Freeport LNG, the second-biggest U.S. LNG export plant, started to exit an eight-month outage in February. That outage was caused by a fire in June 2022. When operating at full power, Freeport LNG can turn about 2.1 bcfd of gas into LNG for export.
Freeport LNG said on Feb. 21 that it 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 already approved the restart of two of Freeport LNG’s three liquefaction trains (Trains 2 and 3). On Monday, Freeport LNG asked regulators for permission to restart the third (Train 1).
With the restart of Freeport LNG, the total amount of gas flowing to all big U.S. LNG export plants jumped to 13.2 bcfd so far in March, up from 12.8 bcfd in February. That compares with a 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.
SUPPLY AND DEMAND
Refinitiv said average gas output in the U.S. Lower 48 states rose to 98.4 bcfd so far in March from 98.2 bcfd in February. That compares with a monthly record high of 99.9 bcfd in November 2022.
Analysts said production declined earlier this year due in part to recent drops in gas prices of 40% in January and 35% in December that caused several energy firms to reduce the number of rigs they were using to drill for gas.
In addition, extreme cold in early February and late December also cut gas output by freezing oil and gas wells in several producing basins.
Meteorologists forecast the weather in the Lower 48 states would remain mostly colder-than-normal through March 17 after several warmer-than-normal days from March 2-6.
Even with colder weather coming, Refinitiv forecast U.S. gas demand, including exports, would ease from 120.8 bcfd this week to 119.0 bcfd next week, mostly on expectations that power generators would burn less gas to produce electricity.