U.S. natural gas futures were little changed after giving up earlier gains of over 5% on Thursday following a federal report showing last week’s storage withdrawal was massive but in line with analysts estimates.
Earlier in the session, prices were up on forecasts for cooler weather and higher heating demand next week than previously expected and the slow return of output after wells and other equipment froze in last week’s Arctic freeze.
Even though it will be cooler than previously expected, meteorologists forecast the weather would remain warmer than normal through early February.
The U.S. Energy Information Administration (EIA) said utilities pulled a much bigger than usual 326 billion cubic feet (bcf) of gas out of storage during the week ended Jan. 19 due to extreme cold last week. That cold boosted gas demand to a daily record high and cut both gas output and liquefied natural gas (LNG) feedgas to a one-year low.
That was the biggest weekly withdrawal since utilities pulled 338 bcf of gas out of storage during a brutal freeze in February 2021 and the all-time record withdrawal of 359 bcf in January 2018.
Last week’s withdrawal was close to the 321-bcf decline analysts forecast in a Reuters poll and compares with a decrease of 86 bcf in the same week last year and a five-year (2019-2023) average decline of 148 bcf for this time of year.
Front-month gas futures for February delivery on the New York Mercantile Exchange fell 0.7 cent, or 0.3%, to $2.634 per million British thermal units (mmBtu) at 10:40 a.m. EST (1540 GMT).
Financial company LSEG said average gas output in the Lower 48 states fell to 103.0 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, U.S. gas output was on track to jump by 13.7 bcfd from Jan. 17-25 to a preliminary 104.2 bcfd on Thursday. That, however, was not enough to make up for the 17.2 bcfd output drop 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. 9.
With less frigid temperatures coming, LSEG forecast U.S. gas demand in the Lower 48, including exports, would drop from 144.7 bcfd this week to 125.5 bcfd next week. The forecast for next week was higher than LSEG’s outlook on Wednesday. That compares with a daily record demand of 168.4 bcfd on Jan. 16 during the arctic freeze.
U.S. pipeline exports to Mexico rose to an average of 5.8 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 the 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 fell 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 rise by about 4.8 bcfd from Jan. 17-25 to a preliminary 14.0 bcfd on Thursday 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.
(Reporting by Scott DiSavino; Editing by Chizu Nomiyama and Jonathan Oatis)