U.S. natural gas futures gained about 2% on Thursday on forecasts for colder weather and higher heating demand in early January than previously expected and as record amount of gas continued to flow to liquefied natural gas (LNG) export plants.
That price increase came ahead of a federal report expected to show last week’s storage withdrawal was smaller than usual for this time of year because warmer-than-normal weather kept heating demand low.
Analysts forecast U.S. utilities pulled 80 billion cubic feet (bcf) of gas out of storage during the week ended Dec. 15. That compares with a withdrawal of 82 bcf in the same week last year and a five-year (2018-2022) average decline of 107 bcf.
If correct, last week’s decrease would cut stockpiles to 3.584 trillion cubic feet (tcf), or 8.7% above the five-year average of 3.297 tcf for the time of year.
Front-month gas futures for January delivery on the New York Mercantile Exchange (NYMEX) rose 4.9 cents, or 2.0%, to $2.496 per million British thermal units (mmBtu) at 9:16 a.m. EST (1416 GMT).
Investor interest in trading gas has increased in recent weeks with open interest in NYMEX futures at a 27-month high of 1.447 million contracts on Dec. 19 and shares outstanding in the U.S. Natural Gas Fund (UNG) at a record 201.2 million contracts on Dec. 18. UNG is an Exchange Traded Fund (ETF) designed to track the daily price movements of gas.
Record production and ample supplies of gas in storage have weighed on gas prices for weeks, prompting some traders to forecast that futures for this winter (November-March) have already peaked at $3.608 per mmBtu on Nov. 1.
Looking ahead, analysts project U.S. gas prices will rise in coming years as new LNG export plants enter service in the U.S., Canada and Mexico to meet rising global demand of the fuel.
But expected delays at Exxon Mobil /QatarEnergy’s Golden Pass LNG export plant in Texas and Venture Global LNG’s Plaquemines in Louisiana have caused some analysts to reduce their forecasts for U.S. gas demand and prices in 2024.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the lower 48 U.S. states rose to 108.6 billion cubic feet per day (bcfd) so far in December from a record 108.3 bcfd in November.
Meteorologists projected the weather would remain warmer-than-normal through Dec. 31 before turning near- to colder-than-normal from Jan. 1-5.
LSEG forecast U.S. gas demand in the Lower 48 states, including exports, would drop from 126.2 bcfd this week to 120.8 bcfd next week as many businesses and government offices shut for the Christmas holiday. Those forecasts were higher than LSEG’s outlook on Wednesday.
U.S. pipeline exports to Mexico fell to an average of 3.9 bcfd so far in December, down from 5.6 bcfd in November and a record 7.0 bcfd in August.
Analysts, however, expect exports to Mexico to rise in coming months once U.S. energy company New Fortress Energy’s plant in Altamira starts pulling in U.S. gas to turn into LNG for export in December.
Gas flows to the seven big U.S. LNG export plants rose to an average of 14.6 bcfd so far in December, up from a record 14.3 bcfd in November.
(Reporting by Scott DiSavino; Editing by Andrea Ricci)