U.S. natural gas futures dipped more than 5% on Friday to their lowest since late-February on expectations for lower heating demand due to moderating weather, which set the contract on track for a second consecutive weekly decline.
Front-month gas futures for April delivery fell 14.09 cents, or 5.6%, to $2.37 per million British thermal units (mmBtu) by 11:09 a.m. EDT.
The weather outlook for later in March has shifted from colder-than-normal along the eastern seaboard to slightly warmer-than-normal, reducing the expectation of late season heating demand, said Gary Cunningham, director of Market Research at Tradition Energy, adding that
Data provider Refinitiv estimated 275 heating degree days (HDDs) over the next two weeks, down from 381 HDDs estimated on Thursday.
HDDs estimate demand to heat homes and businesses by measuring the number of degrees a day’s average temperature is below 65 degrees Fahrenheit (18 degrees Celsius).
“We are expecting gas demand for power generation this summer to set new records as switch over from dirtier fuels (coal) to natural gas continues to be the trend here in the U.S.,” Cunningham said.
For the week, the contract was down about 2% so far.
Refinitiv forecasted that U.S. gas demand, including exports, would slide from 116.9 bcfd this week to 108.0 bcfd next week.
Meanwhile, overall risk sentiment remained weak. Wall Street’s main indexes fell on Friday as investors remained wary about a potential banking crisis.
The U.S. Energy Information Administration (EIA) on Thursday said utilities pulled 58 billion cubic feet (bcf) of gas from storage during the week ended March 10 which was lower than 62-bcf withdrawal analysts forecast in a Reuters poll and compares with a decrease of 86 bcf in the same week last year and a five-year (2018-2022) average decline of 77 bcf.
Meanwhile, gas flows to LNG export plants have been on track to hit record highs since Freeport LNG’s export plant in Texas exited an eight-month outage in February. The plant was shut due to a fire in June 2022.
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 March 8. Liquefaction trains turn gas into LNG.
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 seven big U.S. LNG export plants, including Freeport LNG, can turn about 13.8 bcfd of gas into LNG.