U.S. natural gas futures edged up about 1% on Tuesday as the amount of gas flowing to liquefied natural gas (LNG) export plants remains at record highs after Freeport LNG’s facility in Texas exited an eight-month outage in February and returned to full power over the past week.
Freeport LNG shut in June 2022 after a fire.
That price increase came despite forecasts for milder weather and less heating demand over the next two weeks than previously expected, which should allow utilities to start injecting gas into stockpiles this week.
Front-month gas futures for May delivery on the New York Mercantile Exchange (NYMEX) rose 3 cents, or 1.4%, to $2.127 per million British thermal units at 9:00 a.m. EDT (1300 GMT).
The market has been extremely volatile in recent weeks with the front-month gaining or losing more than 5% in 12 of the past 22 trading days.
With gas market volatility rising, open interest in NYMEX gas futures rose to 1.35 million contracts on Monday, the most since October 2021 for a third day in a row.
Freeport LNG’s export plant was on track to pull in about 2.2 billion cubic feet per day (bcfd) of gas on Tuesday, down from 2.3 bcfd on Monday, according to data provider Refinitiv.
That, however, was still more than the 2.1 bcfd of gas Freeport LNG can turn into LNG for export. LNG plants can pull in more gas than they can turn into LNG because they use some of the fuel to power equipment used to produce LNG.
Average gas flows to all seven big U.S. LNG export plants rose to 14.1 bcfd so far in April, up from a record 13.2 bcfd in March.
The seven big U.S. LNG export plants 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 99.9 bcfd so far in April, up from 99.7 bcfd in March. That compares with a monthly record of 100.4 bcfd in January 2023.
On a daily basis, however, gas output was on track to plunge 2.8 bcfd to a preliminary two-month low of 97.8 bcfd on Tuesday. But traders noted it was likely that daily decline, which would be the biggest since December, would be revised later in the day.
Meteorologists projected the weather in the Lower 48 states would remain mostly warmer than normal through April 19, except for a few days from April 6-8 that will be near to colder than normal.
With warmer spring-like weather expected to keep reducing the amount of gas burned to heat homes and businesses, Refinitiv forecast U.S. gas demand, including exports, would drop from 102.1 bcfd this week to 96.7 bcfd next week. Those forecasts were lower than Refinitiv’s outlook on Monday.
Mostly mild weather over the 2022-2023 winter allowed utilities to leave more gas in storage than usual and should enable them start injecting fuel into inventories this week.
Gas stockpiles were about 21% above their five-year average (2018-2022) during the week ended March 24 and were expected to end about 20% above normal during the colder-than-normal week ended March 31, according to federal data and analysts’ estimates.