U.S. natural gas futures declined about 2% on Wednesday after data showed the amount of gas flowing to Freeport LNG’s export plant in Texas had dropped and forecasts indicated the weather in the near term would be warmer than previously expected.
Front-month gas futures for April delivery had fallen 6.2 cents, or 2.3%, to $2.625 per million British thermal units (mmBtu) by 8:55 a.m. EST (1355 GMT), even though the total amount of gas flowing to all seven big U.S. LNG export plants was still on track to hit a record high this month.
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 forecasts for warmer weather before jumping 9% to settle at a five-week high over $3 just over a week later on March 3 on forecasts for colder weather and then plunging 15% on March 6 on an outlook for warmer temperatures.
Freeport LNG’s export plant was on track to pull in just 0.1 billion cubic feet per day (bcfd) of gas on Wednesday, down from 1.0 bcfd on Tuesday, according to data provider Refinitiv. Freeport exited an eight-month outage in February. That outage was caused by a fire in June 2022.
Officials at Freeport LNG had no comment on the decline in gas flows.
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) in February. Liquefaction trains turn gas into LNG.
Freeport LNG asked federal regulators for permission to restart the third train (Train 1) and other parts of the plant on Feb. 27. But federal regulators had more questions on March 6 about that request, which could delay the timing of the restart of Train 1.
Total gas flows to all seven of the big U.S. LNG export plants has risen to 13.3 bcfd so far in March from 12.8 bcfd in February. That would top the 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 has risen 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 were using to drill 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.
The latest forecasts show the weather in the Lower 48 states would remain mostly colder than normal through March 23 after some near- to warmer-than-normal days from March 8-13.
With colder weather coming, Refinitiv forecast U.S. gas demand, including exports, would rise from 115.5 bcfd this week to 119.2 bcfd next week. Those forecasts were lower than Refinitiv’s outlook on Tuesday.
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.