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U.S. natgas jumps 5%, but still on track for record quarterly loss

Credit: REUTERS/Gary Cameron

March 31 (Reuters) - U.S. natural gas futures jumped about 5% to a one-week high on Friday on forecasts for more demand next week than previously expected with rising amounts of gas flowing to liquefied natural gas (LNG) export plants, but they remained on track to drop by a record 51% this quarter,

Feedgas to those LNG export plants climbed after Freeport LNG's facility in Texas exited an eight-month outage in February and returned to near full power this week. Freeport LNG shut in June 2022 after a fire.

The quarterly price drop came on rising output and mostly mild weather so far this winter that kept heating demand low and allowed utilities to leave more gas in storage than usual.

Front-month gas futures NGc1 for May delivery on the New York Mercantile Exchange (NYMEX) rose 10.1 cents, or 4.8%, to $2.205 per million British thermal units at 9:17 a.m. EDT (1317 GMT), putting the contract on track for its highest close since March 24.

Despite Friday's gain, the front-month was still down about 1% for the week, 20% for the month and 51% for the quarter. That would be the contract's biggest quarterly drop on record, topping the current record loss of 49% during the first quarter of 2001.

The market has been extremely volatile this month, with the front-month gaining or losing more than 5% on 10 of the past 22 trading days.

With gas market volatility rising in recent weeks, open interest in gas futures on the NYMEX rose to 1.32 million contracts on Thursday, the highest since October 2021. Open interest in the front-month contract alone rose to over 380,200 contracts on Thursday, the most since March 2020.

Freeport LNG's export plant was on track to pull in about 2.0 billion cubic feet per day (bcfd) of gas on Friday, up from 1.5 bcfd on Thursday, according to data provider Refinitiv.

Energy traders said that was a sure sign that Freeport LNG was back near full power since the plant can turn about 2.1 bcfd of gas into LNG for export when operating at full power.

Another U.S. LNG company, Venture Global LNG, meanwhile, told federal energy regulators this week that it would continue to work on its 1.6-bcfd Calcasieu Pass export plant in Louisiana before it enters full commercial operations.

Analysts, however, noted that the work at Calcasieu will likely not have much impact on total U.S. LNG exports since the plant was already conducting some of the work and gas flows have averaged about 1.4 bcfd so far in March.

Total gas flows to all seven big U.S. LNG export plants, including Freeport LNG and Calcasieu, rose to an average of 13.2 bcfd so far in March, up from 12.8 bcfd in February. That would top the monthly record of 12.9 bcfd in March 2022, before Freeport LNG shut.

The seven big U.S. LNG export plants can turn about 13.8 bcfd of gas into LNG.

SUPPLY AND DEMAND

Refinitiv said average gas output in the U.S. Lower 48 states rose to 98.6 bcfd so far in March, up from 98.1 bcfd in February. The monthly record is 99.9 bcfd in November 2022.

Meteorologists projected the weather in the Lower 48 states would remain mostly near normal through April 13.

With warmer spring-like weather expected to keep reducing the amount of gas burned to heat homes and businesses, Refinitiv forecast U.S. gas demand, including exports, would drop from 110.6 bcfd this week to 104.1 bcfd next week and 103.8 bcfd in two weeks. The forecast for next week was higher than Refinitiv's outlook on Thursday.

Mild winter weather allowed utilities to leave more gas in storage so far this year and should let them start injecting fuel into inventories at the beginning of April.

Gas stockpiles were about 21% above their five-year average (2018-2022) during the week ended March 24 and were expected to end about 20% above normal during the colder-than-normal week ended March 31, according to federal data and analysts' estimates. EIA/GASNGAS/POLL

Week ended Mar 31 (Forecast)

Week ended Mar 24 (Actual)

Year ago Mar 31

Five-year average Mar 31

U.S. weekly natgas storage change (bcf):

-20

-47

-24

U.S. total natgas in storage (bcf):

1,833

1,853

1,387

1,532

U.S. total storage versus 5-year average

19.6%

21.0%

Global Gas Benchmark Futures ($ per mmBtu)

Current Day

Prior Day

This Month Last Year

Prior Year Average 2022

Five Year Average (2018-2022)

Henry Hub NGc1

2.10

2.10

4.98

6.54

3.60

Title Transfer Facility (TTF) TRNLTTFMc1

14.38

13.92

41.81

40.50

14.39

Japan Korea Marker (JKM) JKMc1

12.70

12.54

36.96

34.11

14.31

Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days

Two-Week Total Forecast

Current Day

Prior Day

Prior Year

10-Year Norm

30-Year Norm

U.S. GFS HDDs

191

193

235

211

195

U.S. GFS CDDs

30

30

25

25

24

U.S. GFS TDDs

221

223

260

236

219

Refinitiv U.S. Weekly GFS Supply and Demand Forecasts

Prior Week

Current Week

Next Week

This Week Last Year

Five-Year Average For Month

U.S. Supply (bcfd)

U.S. Lower 48 Dry Production

98.5

99.0

99.0

94.6

89.4

U.S. Imports from Canada

7.8

7.0

7.3

9.7

8.6

U.S. LNG Imports

0.0

0.0

0.0

0.0

0.1

Total U.S. Supply

106.2

106.0

106.3

104.3

99.1

U.S. Demand (bcfd)

U.S. Exports to Canada

2.8

2.8

2.9

3.2

3.0

U.S. Exports to Mexico

4.8

5.4

5.2

5.4

5.2

U.S. LNG Exports

13.0

13.2

13.8

12.9

7.4

U.S. Commercial

13.1

11.5

9.6

12.1

12.4

U.S. Residential

20.6

17.7

14.0

18.1

19.6

U.S. Power Plant

29.0

29.9

29.3

25.0

25.7

U.S. Industrial

23.6

22.8

22.0

23.7

23.6

U.S. Plant Fuel

4.9

4.9

4.9

4.9

4.9

U.S. Pipe Distribution

2.5

2.4

2.2

2.5

2.6

U.S. Vehicle Fuel

0.1

0.1

0.1

0.1

0.1

Total U.S. Consumption

93.7

89.2

82.1

86.4

88.9

Total U.S. Demand

114.3

110.6

104.1

107.9

104.5

U.S. weekly power generation percent by fuel - EIA

Week ended Mar 31

Week ended Mar 24

Week ended Mar 17

Week ended Mar 10

Week ended Mar 3

Wind

12

14

15

12

13

Solar

4

3

3

3

3

Hydro

7

7

7

7

7

Other

2

2

2

2

2

Petroleum

Natural Gas

40

37

37

41

40

Coal

16

17

16

16

15

Nuclear

19

18

19

20

20

SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)

Hub

Current Day

Prior Day

Henry Hub NG-W-HH-SNL

1.95

1.94

Transco Z6 New York NG-CG-NY-SNL

1.68

1.93

PG&E Citygate NG-CG-PGE-SNL

7.10

7.18

Eastern Gas (old Dominion South) NG-PCN-APP-SNL

1.65

1.78

Chicago Citygate NG-CG-CH-SNL

1.95

2.02

Algonquin Citygate NG-CG-BS-SNL

2.03

2.55

SoCal Citygate NG-SCL-CGT-SNL

8.38

9.34

Waha Hub NG-WAH-WTX-SNL

1.54

1.51

AECO NG-ASH-ALB-SNL

1.87

1.98

SNL U.S. Power Next-Day Prices ($ per megawatt-hour)

Hub

Current Day

Prior Day

New England EL-PK-NPMS-SNL

31.25

34.00

PJM West EL-PK-PJMW-SNL

24.75

27.50

Ercot North EL-PK-ERTN-SNL

21.00

18.00

Mid C EL-PK-MIDC-SNL

66.00

66.00

Palo Verde EL-PK-PLVD-SNL

40.00

40.00

SP-15 EL-PK-SP15-SNL

49.25

49.25

(Reporting by Scott DiSavino; Editing by Sharon Singleton)

((scott.disavino@thomsonreuters.com; +1 332 219 1922; Reuters Messaging: scott.disavino.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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