U.S. natural gas futures fell about 5% on Wednesday from a one-month high in the prior session on forecasts confirming the weather will remain mostly mild and heating demand low for the next two weeks.
That price decline came despite a drop in preliminary daily output and as the amount of gas flowing to U.S. liquefied natural gas (LNG) export plants remained on track to hit a record high for a second month in a row in April after Freeport LNG’s export plant in Texas exited an eight-month outage in February.
Front-month gas futures for May delivery on the New York Mercantile Exchange fell 12 cents, or 5.1%, to $2.246 per million British thermal units at 9:15 a.m. EDT (1315 GMT). On Tuesday, the contract gained about 4% to close at its highest since March 16.
The market has been extremely volatile over the past month or so with the front-month gaining or losing more than 5% on 10 of the past 22 trading days.
With gas market volatility rising, shares outstanding in the U.S. Natural Gas Fund climbed to a record 181.3 million on Tuesday, topping the prior record of 176.9 million on April 10. UNG is an exchange-traded fund (ETF) designed to track the daily price movement of gas.
Freeport LNG’s export plant, which shut in June 2022 after a fire, was on track to pull in about 2.2 billion cubic feet per day (bcfd) of gas on Wednesday, according to data provider Refinitiv.
That is the same as the plant has been pulling in during most of April, which is above the 2.1 bcfd of gas Freeport LNG can turn into LNG for export. LNG plants usually pull in a little 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 100.2 bcfd so far in April, up from 99.7 bcfd in March. That compares with a monthly record of 100.4 bcfd in January.
On a daily basis, however, output was on track to drop about 1.5 bcfd over the past couple of days to a preliminary two-week low of 99.3 bcfd on Wednesday due mostly to declines in Pennsylvania and West Virginia. Analysts, however, noted preliminary data is often revised later in the day.
Meteorologists projected the weather in the Lower 48 states would remain mostly near normal through April 4, except for some colder-than-normal days from April 23-25 and May 1-3.
With the weather turning seasonally warmer, Refinitiv forecast U.S. gas demand, including exports, would ease from 95.9 bcfd this week to 95.5 bcfd next week due to an expected decline in gas flows to LNG plants. Those forecasts were similar to Refinitiv’s outlook on Tuesday.
Mostly mild weather during the winter of 2022-2023 allowed utilities to leave more gas in storage than usual.
Gas stockpiles were about 19% above their five-year average (2018-2022) during the week ended April 7 and were expected to end about 23% above normal during the warmer-than-usual week ended April 14, according to federal data and analysts’ estimates.