U.S. natural gas futures fell about 4% to a four-week low on Monday on rising output and forecasts for milder weather and lower heating demand next week than previously expected that should allow utilities to start injecting gas into storage at the beginning of April.
That price drop came even though the amount of gas flowing to liquefied natural gas (LNG) export plants was on track to rise to a monthly record high in March after Freeport LNG’s export plant in Texas exited an eight-month outage in February. Freeport LNG shut due to a fire in June 2022.
Front-month gas futures for April delivery fell 8.8 cents, or 4.0%, to $2.128 per million British thermal units (mmBtu) at 8:54 a.m. EDT (1254 GMT), putting the contract on track for its lowest close since Feb. 21 when it settled at a 29-month low of $2.073.
Even though gas prices were down about 53% so far this year, gas speculators last week cut their net short futures and options positions on the New York Mercantile and Intercontinental Exchanges for a fourth week in a row to their lowest since August 2022, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.
That was the first time speculators cut their net short positions for four consecutive weeks since April 2022.
Freeport LNG’s export plant was on track to pull in about 1.5 billion cubic feet per day (bcfd) of gas on Monday, up from 0.6 bcfd on Sunday, according to Refinitiv data. On March 8, Freeport LNG said 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 had canceled some cargoes due to issues with one of the facility’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 13.0 bcfd so far in March, up 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, up from 98.1 bcfd in February. That compares with a monthly record of 99.9 bcfd in November 2022.
Meteorologists projected the weather in the Lower 48 states would remain mostly near normal through April 11.
With the coming of warmer spring-like weather, Refinitiv forecast U.S. gas demand, including exports, would drop from 109.4 bcfd this week to 102.5 bcfd next week. The forecast for this week was higher than Refinitiv’s outlook on Friday, while its forecast for next week was lower.
Mild winter weather so far this year has prompted utilities to leave more gas in storage than usual and should allow them to start injecting fuel into inventories at the beginning of April.
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.