U.S. natgas futures jump 7% on colder weather forecasts, heating demand

U.S. natural gas futures soared about 7% on Tuesday from an 18-month low in the prior session as gas started to flow to the long-shut Freeport LNG export plant in Texas and on forecasts for colder weather and more heating demand over the next two weeks than previously expected.

Front-month gas futures for February delivery were up 24.4 cents, or 7.1%, to $3.663 per million British thermal units (mmBtu) at 9:59 a.m. EST (1459 GMT). On Friday the contract settled at its lowest price since June 24, 2021.

Tuesday’s gain would be the biggest daily percentage increase since the middle of December. It also pushed the contract out of technically oversold territory for the first time in five days.

Traders said the biggest market uncertainty remains when Freeport LNG’s export plant in Texas will return to service after shutting due to a fire on June 8, 2022.

Gas started flowing to the Freeport plant on Jan. 14 and was on track to reach 69 million cubic feet per day (mmcfd) on Tuesday, according to data from Refinitiv.

Freeport’s restart timeline, however, has been delayed many times from October to November to December and then most recently to January.

Whenever the Freeport plant returns, U.S. gas demand will jump. The plant can turn about 2.1 billion cubic feet per day (bcfd) of gas into LNG, which is about 2% of U.S. daily production.

Even though some vessels have turned away from Freeport, a few tankers, including Prism Diversity, Prism Courage and Prism Agility, were still waiting in the Gulf of Mexico to pick up LNG from the plant. Some have been there since early November.

In addition, other ships were still sailing toward Freeport, including Prism Brilliance, Kmarin Diamond and Wilforce, and are expected to reach the plant in late January.

U.S. GAS OUTPUT RISING

Data provider Refinitiv said that average gas output in the U.S. Lower 48 states has risen to 98.6 bcfd so far in January, up from 96.7 bcfd in December. That compares with a monthly record of 99.9 bcfd in November 2022.

With colder weather coming, Refinitiv forecast U.S. gas demand, including exports, would jump from 121.3 bcfd this week to 130.4 bcfd next week. Those forecasts were higher than Refinitiv’s outlook on Friday.

The average amount of gas flowing to U.S. LNG export plants has climbed to 12.2 bcfd so far in January, up from 11.9 bcfd in December. That compares with a monthly record of 12.9 bcfd in March 2022.
Source: Reuters