U.S. natural gas futures held near a three-week low on Wednesday on forecasts for less cold weather and lower demand this week than previously expected and with an increase in gas output so far this month.
That lack of price movement came despite forecasts for more demand next week than previously expected and record gas flows to liquefied natural gas (LNG) export plants since the return in February of Freeport LNG’s plant in Texas from an eight-month outage.
Front-month gas futures for April delivery fell 0.9 cents, or 0.4%, to $2.329 per million British thermal units (mmBtu) at 9:26 a.m. EDT (1326 GMT). On Friday, the contract fell about 7% to close at its lowest since Feb. 23.
The gas 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% on colder forecasts to settle at a five-week high above $3 just over a week later on March 3. It plunged 15% on March 6 on a warmer outlook.
Freeport LNG’s export plant was on track to pull in 0.8 billion cubic feet per day (bcfd) of gas for a third day in a row on Monday, 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 was shut due to a fire in June 2022.
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 98.7 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 gas price declines 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 some oil and gas wells in several producing basins.
Meteorologists projected the weather in the Lower 48 states would remain mostly near-normal through April 3.
Refinitiv forecast U.S. gas demand, including exports, would slide from 116.2 bcfd this week to 108.3 bcfd next week. The forecasts for this week were lower than Refinitiv’s outlook on Friday, while its forecasts for next week were higher.
Milder winter weather this year has prompted utilities to leave more gas in storage than usual.
Gas stockpiles were about 24% above their five-year average (2018-2022) during the week ended March 10 and were expected to end about 16% above normal during the colder-than-normal week ended March 17, according to federal data and analysts’ estimates.