U.S. natural gas futures eased about 1% on Tuesday, putting the front-month on track to close at a 30-month low, on rising output and mild weather forecasts that should allow utilities to start injecting gas into storage at the beginning of April.
That small price decline came despite a forecast rise in gas demand with the amount of feedgas flowing to liquefied natural gas (LNG) export plants on track to hit a monthly record high in March after Freeport LNG’s export plant in Texas exited an eight-month outage in February. Freeport LNG shut in June 2022 due to a fire.
On their second to last day as the front-month, gas futures for April delivery fell 3 cents, or 1.4%, to $2.058 per million British thermal units (mmBtu) at 8:15 a.m. EDT (1215 GMT), putting the contract on track for their lowest close since September 2020.
Futures for May, which will soon be the front-month, were trading down about 3 cents to $2.19 per mmBtu.
The market has been extremely volatile this month, with the front-month gaining or losing more than 5% on nine of the past 19 trading days. So far this year, gas prices were down about 53%.
Freeport LNG’s export plant was on track to pull in about 1.6 billion cubic feet per day (bcfd) of gas on Tuesday, up from 1.2 bcfd on Monday, 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 said Freeport LNG had canceled some cargoes for March due to issues with one of three liquefaction trains, and noted the facility 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 big U.S. LNG export plants rose to an average of 13.1 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.
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. The monthly record is 99.9 bcfd in November 2022.
Meteorologists projected the weather in the Lower 48 states would remain mostly near normal through April 12.
With warmer spring-like weather expected to reduce the amount of gas burned to heat homes and businesses, Refinitiv forecast U.S. gas demand, including exports, would drop from 110.3 bcfd this week to 103.9 bcfd next week. Those forecasts, however, were higher than Refinitiv’s outlook on Monday as LNG exports rise.
Mild winter weather allowed utilities to leave more gas in storage so far this year and should let them 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.