U.S. natural gas futures rose about 2% on Thursday after collapsing 8% in the prior session as the amount of gas flowing to liquefied natural gas (LNG) export plants remains on track to hit a record high this month after Freeport LNG’s plant in Texas exited an eight-month outage in February.
That price increase came despite a rise in output so far this month and forecasts for less cold weather and lower heating demand over the next two weeks than previously expected.
The price move also came ahead of a federal report expected to show last week’s storage withdrawal was bigger than usual for this time of year because cold weather boosted heating demand for the fuel.
Analysts forecast U.S. utilities pulled 75 billion cubic feet (bcf) of gas from storage during the week ended March 17. That compares with a decrease of 55 bcf in the same week last year and a five-year (2018-2022) average decline of 45 bcf.
If correct, last week’s decrease would cut stockpiles to 1.897 trillion cubic feet (tcf), or 22.5% above the five-year average for this time of year.
Front-month gas futures for April delivery on the New York Mercantile Exchange (NYMEX) rose 4.7 cents, or 2.2%, to $2.218 per million British thermal units (mmBtu) at 8:09 a.m. EDT (1209 GMT). On Wednesday, the contract dropped about 8% to settle at its lowest since closing at a 29-month low of $2.073 on Feb. 21.
With interest in gas markets rising in recent weeks, open interest in gas futures on the NYMEX rose to 1.28 million shares on Tuesday, the highest since November 2021.
The gas market has been extremely volatile in recent weeks as traders bet on the latest weather forecasts – Wednesday’s decline was only the biggest daily percentage drop since early March.
Freeport LNG’s export plant was on track to pull in about 1.5 billion cubic feet per day (bcfd) of gas on Thursday, up from 1.1 bcfd on Wednesday, according to Refinitiv data. Freeport LNG said on March 8 that it anticipated feedgas flows would rise and fall as the plant returns to full production over the “next few weeks.”
When operating at full power, Freeport LNG can turn about 2.1 bcfd of gas into LNG for export. The plant shut after a fire in June 2022.
Total gas flows to all seven of the big U.S. LNG export plants rose to an average of 13.1 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 98.5 bcfd so far in March, from 98.1 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 falls 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 colder-than-normal through April 7.
Refinitiv forecast U.S. gas demand, including exports, would slide from 114.7 bcfd this week to 108.7 bcfd next week. Those forecasts were lower than Refinitiv’s outlook on Wednesday.