U.S. natural gas futures eased about 1% on Wednesday after breaking through a key level of technical support as output rises and the amount of gas flowing to liquefied natural gas (LNG) export plants remains low.
That puts the contract, which is currently trading at a nine-month low, on track for its lowest close in over three years.
Prices declined even though the latest forecasts called for seasonally cold weather and higher heating demand in mid- to late February than previously expected.
Traders noted output was rising as gas wells keep returning to service after freezing during an Arctic blast in mid-January, while LNG feedgas remained low due to an ongoing outage at Freeport LNG’s export plant in Texas.
Front-month gas futures for March delivery on the New York Mercantile Exchange (NYMEX) fell 2.1 cents, or 1.1%, to $1.988 per million British thermal units (mmBtu) at 10:02 a.m. EST (1502 GMT), putting the contract on track for its lowest close since September 2020.
That kept the contract in technically oversold territory for a second day in a row and pushed it below the psychological $2-per-mmBtu point of technical support where speculators have placed lots of put and call options.
Rising price volatility in recent weeks, meanwhile, has increased interest in gas trading with open interest in NYMEX futures rising to 1.510 million contracts on Feb. 5, the most since February 2020, for a fifth day in a row.
SUPPLY AND DEMAND
Financial company LSEG said gas output in the U.S. Lower 48 states rose to an average of 105.5 billion cubic feet per day (bcfd) so far in February from 102.1 bcfd in January. That, however, was still below the monthly record high of 106.3 bcfd in December.
Meteorologists projected temperatures in the Lower 48 states would remain warmer than normal through Feb. 12 before sliding to mostly near- to below-normal levels from Feb. 13-22.
With seasonally colder weather coming, LSEG forecast U.S. gas demand in the Lower 48, including exports, would rise from 122.6 bcfd this week to 125.1 bcfd next week. Those forecasts were higher than LSEG’s outlook on Tuesday.
Gas flows to the seven big U.S. LNG export plants slid to an average of 13.5 bcfd so far in February, down from 13.9 bcfd in January and a monthly record high of 14.7 bcfd in December.
Analysts said U.S. LNG feedgas would likely not return to record levels until Freeport LNG was back at full power, which could occur in mid- to late-February.
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 $9 per mmBtu at both the Dutch Title Transfer Facility (TTF) benchmark in Europe and the Japan Korea Marker (JKM) benchmark in Asia.
(Reporting by Scott DiSavino; editing by Jonathan Oatis)