U.S. natural gas futures gained about 3% on Friday after falling to a one-month low in the prior session on forecasts confirming the weather will remain mostly colder than normal for the next two weeks, keeping heating demand higher than usual through early April.
That price increase also came on expectations the amount of gas flowing to liquefied natural gas (LNG) export plants would hit a record high during the month of March after Freeport LNG’s export plant in Texas exited an eight-month outage in February. It shut in a fire in June 2022.
Front-month gas futures for April delivery rose 6 cents, or 2.8%, to $2.214 per million British thermal units (mmBtu) at 7:59 a.m. EDT (1159 GMT). On Thursday, the contract closed at its lowest since Feb. 21 when it settled at a 29-month low of $2.073.
For the week, the front-month was down about 5%, putting it down for a third week in a row for the first time since early February.
Freeport LNG’s export plant was on track to pull in about 1.6 billion cubic feet per day (bcfd) of gas on Friday, up from 1.5 bcfd on Thursday, 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.”
Sources familiar with the plant, however, said Freeport LNG was canceling some cargoes due to issues with one of the plant’s three liquefaction trains and could take longer than the company expects to return to full service. Liquefaction trains turn gas into LNG for export.
When operating at full power, Freeport LNG can turn about 2.1 bcfd of gas into LNG for export.
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 98.4 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 as some oil and gas wells in several producing basins froze.
Meteorologists projected the weather in the Lower 48 states would remain mostly colder-than-normal through April 8.
But with a seasonal warming of the weather with the coming of spring, Refinitiv forecast U.S. gas demand, including exports, would slide from 114.4 bcfd this week to 108.6 bcfd next week and 107.0 bcfd in two weeks. The forecast for this week was lower than Refinitiv’s outlook on Thursday.
Milder winter weather so far this year has prompted utilities to leave more gas in storage than usual.
Gas stockpiles were about 23% above their five-year average (2018-2022) during the week ended March 17 and were expected to end about 20% above normal during the colder-than-normal week ended March 24, according to federal data and analysts’ estimates.