U.S. natural gas futures rose about 2% on Tuesday, after plunging 15% in the prior session, on forecasts for more cold weather over the next two weeks than previously expected and record gas flows to liquefied natural gas (LNG) export plants after Freeport LNG’s plant in Texas exited an outage.
That price rise came despite a increase in gas output so far this month and forecasts for less demand over the next two weeks than previously expected because most of the cold is not coming until mid March.
Front-month gas futures for April delivery rose 5.8 cents, or 2.3%, to $2.630 per million British thermal units (mmBtu) at 8:04 a.m. EST (1304 GMT).
The market has been extremely volatile in recent weeks as traders bet on the latest weather forecasts.
The front-month fell to a 28-month low below $2 per mmBtu in intraday trade on Feb. 22 on warmer forecasts before jumping 9% to settle at a five-week high over $3 on March 3 on colder forecasts and then plunging 15% on March 6 on a less cold weather outlook.
Freeport LNG’s export plant, meanwhile, was on track to pull in about 1.5 billion cubic feet per day (bcfd) of gas on Tuesday, up from 1.0 bcfd on Monday, according to data provider Refinitiv. Freeport exited an eight-month outage in February. That outages was caused by a fire in June 2022.
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.
Federal regulators approved the restart of two of Freeport LNG’s three liquefaction trains (Trains 2 and 3). Liquefaction trains turn gas into LNG.
Freeport asked federal regulators to restart the third train (Train 1) and other parts of the plant on Feb. 27. But on March 6, federal regulators had more questions about that request, which could delay the timing of Train 1’s restart.
Total gas flows to all seven of the big U.S. LNG export plants rose to 13.5 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.
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, up from 98.2 bcfd in February. That compares with a 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 persuaded several energy firms to reduce the number of rigs they have 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 22 after some near- to warmer-than-normal days from March 7-10.
With colder weather coming, Refinitiv forecast U.S. gas demand, including exports, would rise from 115.8 bcfd this week to 120.3 bcfd next week. Those forecasts were lower than Refinitiv’s outlook on Monday.
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.