U.S. natural gas futures fell about 7% on Monday on forecasts for much warmer-than-normal weather over the next two weeks than previously expected that should keep heating demand low.
Front-month gas futures for February delivery on the New York Mercantile Exchange fell 26 cents, or 6.5%, to $3.767 per million British thermal units (mmBtu) at 8:45 a.m EST (1345 GMT). On Friday, the contract closed at its highest since Jan. 16.
Extreme cold and record gas demand last week, however, prompted speculators to boost their net long futures and options positions on the New York Mercantile and Intercontinental Exchange for a seventh week in a row to the highest level since September 2021, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.
To meet last week’s record demand for heat, analysts projected energy firms pulled 317 billion cubic feet (bcf) of gas out of storage during the week ended Jan. 24.
If correct, that would only be the fourth time utilities pulled over 300 bcf of gas from storage in a week, but would fall short of the record 359 bcf withdrawn during a freezing week in January 2018.
Analysts noted last week’s decline should erase the small surplus of gas still in storage over the five-year average for the first time since January 2022, and could boost total withdrawals for the month to a record high.
The current record monthly storage withdrawal is 994 bcf in January 2022, according to federal energy data.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states fell from 103.8 billion cubic feet per day (bcfd) in December to 102.1 bcfd so far in January, due mostly to freezing oil and gas wells and pipes, known as freeze-offs. That compares with a monthly record of 104.6 bcfd in December 2023.
Freeze-offs from Jan. 18-21 cut output by 6.9 bcfd to a one-year low of 96.9 bcfd on Tuesday. Almost all of that curtailed output – about 6.6 bcfd – was on track to be back in service on Monday.
In past years, freeze-offs cut gas output by roughly 8.1 bcfd from Jan. 9-16 in 2024, 4.6 bcfd from Jan. 31-Feb. 1 in 2023, 15.8 bcfd from Dec. 20-24 in 2022, and 20.4 bcfd from Feb. 8-17 in 2021, according to LSEG data.
Meteorologists projected that weather in the Lower 48 states would remain mostly warmer than normal through Feb. 3, before turning mostly near normal from Feb. 4-11.
With the mild weather coming, LSEG forecasts average gas demand in the Lower 48 states, including exports, would fall from 138.2 bcfd this week to 133.9 bcfd next week. The forecasts for this week was lower than LSEG’s outlook on Friday, while its forecast for next week was higher.
On a daily basis, LSEG said total gas use last week peaked at 173.3 bcfd on Jan. 20 and 181.3 bcfd on Jan. 21, easily topping the prior daily record high of 168.4 bcfd on Jan. 16, 2024.
The amount of gas flowing to the eight big U.S. LNG export plants rose to an average of 14.6 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.
(Reporting by Scott DiSavino; Editing by Andrea Ricci)