U.S. natural gas futures climbed about 4% to a one-month high on Thursday on a drop in daily output and forecasts for colder weather and higher heating demand over the next two weeks than previously expected.
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 milder-than-normal weather kept heating demand low.
Analysts forecast U.S. utilities pulled just 40 billion cubic feet (bcf) of gas out of storage during the week ended Dec. 29. That compares with a withdrawal of 219 bcf in the same week last year and a five-year (2018-2022) average decline of 97 bcf.
If correct, last week’s decrease would cut stockpiles to 3.450 trillion cubic feet (tcf), or 12.1% above the five-year average of 3.077 tcf for the time of year.
Front-month gas futures for February delivery on the New York Mercantile Exchange were up 10.4 cents, or 3.9%, at $2.772 per million British thermal units (mmBtu) at 7:49 a.m. EST (1249 GMT), putting the contract on track for its highest close since Dec. 1.
Even though prices were up for a third day in a row and late January is usually the coldest part of the year, many traders said winter futures for November-March likely already peaked at $3.608 per mmBtu on Nov. 1 due primarily to recent record production and ample supplies of gas in storage.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the lower 48 U.S. states had fallen to 107.3 billion cubic feet per day (bcfd) so far in January, down from a monthly record of 108.5 bcfd in December.
Meteorologists projected the weather would remain near to warmer than normal through Jan. 12 before turning colder than normal from Jan. 13-19.
With colder weather coming, LSEG forecast U.S. gas demand in the Lower 48, including exports, would rise from 134.1 bcfd this week to 135.3 bcfd next week. Those forecasts were higher than LSEG’s outlook on Wednesday.
U.S. pipeline exports to Mexico have risen to an average of 5.4 bcfd so far in January, up from 4.6 bcfd in December but still well below the monthly record of 7.0 bcfd in August.
Analysts expect exports to Mexico to rise in coming months once U.S.-based New Fortress Energy’s plant in Altamira in Mexico starts pulling in U.S. gas to turn into LNG for export.
Gas flows to the seven big U.S. LNG export plants have held near an average of 14.7 bcfd so far in January, matching December’s monthly record high.
The U.S. became the world’s biggest LNG supplier in 2023, ahead of recent leaders Australia and Qatar, as much higher global prices fed demand for more exports due in part to supply disruptions and sanctions linked to Russia’s war in Ukraine.
Gas was trading around $11 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe and $12 at the Japan Korea Marker (JKM) in Asia.
(Reporting by Scott DiSavino; Editing by Jan Harvey)