U.S. natural gas futures fell about 4% on Tuesday on forecasts for less heating demand this week than previously expected and lower output reductions from freezing wells so far this winter than in past years.
Energy analysts, however, said spot prices have already soared to their highest levels since last January and noted that futures could spike with the coldest weather of this winter still expected next week.
In addition to winter storms, energy traders said prices could climb in coming days if more oil and gas wells and pipes freeze, an occurrence known in the energy industry as freeze-offs, and with the amount of gas flowing to liquefied natural gas (LNG) export plants already at a record high and on track to rise higher as new units enter service.
Front-month gas futures for February delivery on the New York Mercantile Exchange were down 14.8 cents, or 4.0%, to $3.524 per million British thermal units (mmBtu) at 8:37 a.m. EST (1337 GMT). On Monday, the contract jumped 9% to close at its highest price since Dec. 30.
Extreme cold this week boosted spot gas prices to the highest levels since January 2024 in hubs across the country, including the Waha in West Texas, the Eastern Gas hub in Pennsylvania, the U.S. Henry Hub benchmark in Louisiana, the Southern California border, Chicago and New York.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states has slid to 103.3 billion cubic feet per day (bcfd) so far in January, down from 103.8 bcfd in December. That compares with a record 105.3 bcfd in December 2023.
But since output hit a 10-month high of 106.0 bcfd on Dec. 30, supplies were on track to drop by around 6.6 bcfd to a preliminary eight-week low of 99.4 bcfd on Tuesday due mostly to freeze-offs.
Those output declines so far this year were much smaller than in previous winters. But with the coldest weather still to come, analysts said freeze-offs would likely increase in coming days.
In past winters, freeze-offs slashed gas output by around 16.5 bcfd from Jan. 8-16 in 2024, 19.4 bcfd from Dec. 21-24 in 2022 and 20.4 bcfd from Feb. 8-17 in 2021, according to LSEG data.
Meteorologists projected weather in the Lower 48 states would remain colder than normal through Jan. 22, with the coldest days now expected next week.
With colder weather coming, LSEG forecast average gas demand in the Lower 48, including exports, would rise from 146.2 bcfd this week to 148.8 bcfd next week. The forecast for this week was lower than LSEG’s outlook on Monday, while its forecast for next week was higher.
On a daily basis, LSEG projected total gas use could reach 155.8 bcfd on Jan. 14, which would fall well short of the daily record of 168.4 bcfd on Jan. 16, 2024.
The amount of gas flowing to the eight big U.S. LNG export plants has risen to an average of 15.1 bcfd so far in January, up from 14.4 bcfd in December. That compares with a monthly record high of 14.7 bcfd in December 2023.
On a daily basis, LNG feedgas hit a record 15.3 bcfd on Monday, topping the prior all-time high of 15.2 bcfd on Jan. 3, as flows to Cheniere Energy’s 1.5-bcfd Stage 3 expansion under construction at the existing 2.4-bcfd Corpus Christi plant in Texas boosted total flows to the plant to a 12-month high of 2.5 bcfd.
(Reporting by Scott DiSavino; Editing by Paul Simao)