U.S. natural gas futures rose about 3% on Thursday on forecasts for colder weather and higher heating demand over the next two weeks than previously expected.
Prices also rose as the amount of gas flowing to Freeport LNG’s export plant in Texas increased in recent days after declining earlier in the week.
The price hike came ahead of a federal report expected to show last week’s storage withdrawal was lower than usual for this time of year as mild weather kept heating demand for the fuel low.
Analysts forecast U.S. utilities pulled just 80 billion cubic feet (bcf) of gas from storage during the week ended March 3. That compares with a decrease of 126 bcf in the same week last year and a five-year (2018-2022) average decline of 101 bcf.
If correct, last week’s decrease would cut stockpiles to 2.034 trillion cubic feet (tcf), or 21.7% above the five-year average.
Front-month gas futures for April delivery rose 6.3 cents, or 2.5%, to $2.614 per million British thermal units (mmBtu) at 8:23 a.m. EST (1323 GMT). On Wednesday, the contract fell about 5% to its lowest close since Feb. 24.
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, meanwhile, was on track to pull in 0.8 billion cubic feet per day (bcfd) of gas on Wednesday and Thursday, up from just 0.2 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.
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 and the third train (Train 1) on Wednesday. Liquefaction trains turn gas into LNG.
Total gas flows to all seven of the big U.S. LNG export plants rose to an average of 13.2 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 rose to 98.6 bcfd so far in March 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.
Meteorologists projected weather in the Lower 48 states would remain mostly colder-than-normal through March 24 after some near- to warmer-than-normal days from March 9-11. That is a colder forecast than previously expected.
With colder weather coming, Refinitiv forecast U.S. gas demand, including exports, would rise from 115.8 bcfd this week to 119.6 bcfd next week. Those forecasts were higher than Refinitiv’s outlook on Wednesday.