U.S. natural gas futures plunged by about 12% to a one-week low on Monday on forecasts for much less cold weather and heating demand than previously expected over the next two weeks.
The drop came after the contract soared about 9% on Friday to a five-week high as gas flows to U.S. liquefied natural gas (LNG) export plants jumped to record highs, with Freeport LNG’s export plant in Texas continuing to ramp up after exiting an eight-month outage in February.
Front-month gas futures for April delivery fell 36.6 cents, or 12.2%, to $2.643 per million British thermal units at 8:52 a.m. EST (1352 GMT), putting the contract on track for its lowest close since Jan. 24.
In what has already been an extremely volatile start to the year, Monday’s price drop would be the front-month’s biggest daily percentage decline since Jan. 30 when prices fell about 14%.
Freeport LNG’s export plant was on track to pull in about 1.7 billion cubic feet per day (bcfd) of gas on Monday, up from 1.4 bcfd on Friday, according to data provider Refinitiv.
When operating at full power, Freeport LNG, the second-biggest U.S. LNG export plant, can turn about 2.1 bcfd of gas into LNG for export. The plant shut in a fire in June 2022.
Freeport LNG said on Feb. 21 that it could consume about 2.0 bcfd of feedgas “over the next several weeks.” Some analysts 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 liquefaction trains (Trains 2 and 3). On Monday, Freeport LNG sought permission to restart the third (Train 1). Liquefaction trains turn gas into LNG.
Total gas flowing to U.S. LNG export plants rose to 13.7 bcfd so far in March from 12.8 bcfd in February. That compares with a monthly record of 12.9 bcfd in March 2022, before the Freeport LNG facility shut.
SUPPLY AND DEMAND
Refinitiv said average gas output in the U.S. Lower 48 states rose to 98.5 bcfd so far in March, up from 98.2 bcfd in February. That was still well below the monthly record of 99.9 bcfd in November 2022.
Analysts said production declined earlier this year due in part to drops in gas prices of 40% in January and 35% in December that caused several energy firms to reduce the number of rigs drilling for gas.
In addition, extreme cold in early February and late December 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 21 after some near- to warmer-than-normal days from March 6-10. That coming cold, however was less frigid than Refinitiv projected on Friday.
With colder weather coming, Refinitiv forecast U.S. gas demand, including exports, would rise from 116.7 bcfd this week to 120.7 bcfd next week. Those forecasts, however, were much lower than Refinitiv’s outlook on Friday.
Milder winter weather so far this year has prompted utilities to leave more gas in storage than usual.
Gas stockpiles were about 19% above their five-year average (2018-2022) during the week ended Feb. 24 and were expected to end about 22% above normal during the week ended March 3, according to federal data and analysts’ estimates.