U.S. natural gas futures slid about 3% to a five-week low on Tuesday on forecasts for demand to keep dropping and output to keep rising as the weather turns warmer than normal through at least early February.
That price drop occurred even though the amount of gas flowing to U.S. liquefied natural gas (LNG) export plants climbed over the past week after it fell to a one-year low during last week’s Arctic freeze. That extreme cold also boosted daily gas demand to a record high and cut output to a one-year low by freezing wells.
Front-month gas futures for February delivery on the New York Mercantile Exchange were down 8 cents, or 3.3%, to $2.339 per million British thermal units (mmBtu) at 9:07 a.m. EST (1407 GMT), putting the contract on track for its lowest close since Dec. 13.
That also put the contract down for a sixth day in a row for the first time since late October and pushed it into technically oversold territory for the first time since mid-December.
SUPPLY AND DEMAND
Financial company LSEG said average gas output in the Lower 48 states has fallen to 102.8 billion cubic feet per day (bcfd) so far in January, down from a monthly record of 108.0 bcfd in December.
On a daily basis, however, U.S. gas output was on track to jump by 11.4 bcfd from Jan. 17-23 to a preliminary 101.9 bcfd on Tuesday. It plunged by 17.2 bcfd from Jan. 8-16 to a 12-month low of 90.5 bcfd on Jan. 16, due primarily to freeze-offs and other cold weather events.
Meteorologists projected temperatures in the Lower 48 states would remain warmer than normal from now through at least Feb. 7.
With less frigid temperatures coming, LSEG forecast U.S. gas demand in the Lower 48, including exports, would drop from 143.0 bcfd this week to 122.6 bcfd next week. Those forecasts were lower than LSEG’s outlook on Monday. That compares with a daily record demand of 168.4 bcfd on Jan. 16 during the Arctic freeze.
U.S. pipeline exports to Mexico have risen to an average of 5.7 bcfd so far in January, up from 4.7 bcfd in December but remained 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 LNG export plant in Altamira in Mexico starts pulling in U.S. gas to liquefy for export.
Gas flows to the seven big U.S. LNG export plants have fallen to an average of 13.8 bcfd so far in January, down from a monthly record of 14.7 bcfd in December.
But on a daily basis, LNG feedgas was on track to jump by about 4.6 bcfd from Jan. 17-23 to a preliminary 13.9 bcfd on Tuesday after dropping by 5.8 bcfd from Jan. 13-16 to a one-year low of 9.2 bcfd on Jan. 16 during last week’s freeze.
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.
Global gas was trading around a five-month low of $9 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe and a seven-month low of $9 at the Japan Korea Marker (JKM) benchmark in Asia.
(Reporting by Scott DiSavino; Editing by Paul Simao)