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U.S. natgas slips 2% to 25-month low on milder Feb weather forecast

Credit: REUTERS/ANGUS MORDANT

Adds latest prices

Feb 3 (Reuters) - U.S. natural gas futures slid about 2% to a 25-month low on Friday on forecasts for milder winter weather than expected over the next two weeks, and lower heating demand.

The gas contract was down more than 63% over the past seven weeks, its biggest seven-week collapse in history. January temperaturesin the U.S. Lower 48 states averaged about 41.8 degrees Fahrenheit (5.7 Celsius), second warmest on record for the month.

The warmest January on record was in 2006 when the temperature averaged 42.8 F, according to data from Refinitiv and the federal government.

In an outlook that has further depressed gas prices, meteorologists forecast the current extreme cold freezing parts of the country would end on Feb. 4 and average temperatures will climb back to mostly above-normal levels from Feb. 5 through at least Feb. 18.

Prices fell even though cold weather cut output by freezing oil and gas wells and expectations mounted that the Freeport liquefied natural gas (LNG) export plant in Texas could start pulling in big amounts of fuel as it restarts LNG production in coming weeks.

Federal regulators this week approved Freeport's plan to start sending gas to one of the plant's three liquefaction trains, which turn gas into LNG. On Thursday, Freeport asked regulators for permission to start loading LNG on ships to free up space in the storage tanks for the new LNG expected to be produced soon.

Analysts, however, have said they still do not expect Freeport to return to full LNG production until mid-March or later.

Freeport, the second-biggest U.S. LNG export plant, shut after a fire in June 2022. The energy market expects gas prices to rise once the plant starts producing LNG again. When operating at full power, Freeport can turn about 2.1 billion cubic feet (bcf) of gas into LNG each day. That is about 2% of total U.S. daily gas production.

Federal regulators will hold a public meeting on Freeport on Feb. 11 to provide members of the community and other interested parties an opportunity to voice their concerns about Freeport's restart plans and get an update on what's happening at the plant.

Over the past week, U.S. gas output has dropped about 3.9 billion cubic feet per day (bcfd) to a one-month low of 93.6 bcfd as winter storms freeze oil and gas wells - known as freeze-offs - in several states, including Texas, Oklahoma, New Mexico and Pennsylvania.

Front-month gas futures NGc1 for March delivery fell 4.6 cents, or 1.9%, to settle at $2.410 per million British thermal units (mmBtu), their lowest close since December 2020.

That put the contract down about 22.5% this week, its biggest weekly decline since plunging 23.0% in December.

With extreme cold blanketing the U.S. Northeast, next-day power prices for Friday in New England EL-PK-NPMS-SNLsoared 140% to around $237 per megawatt hour (MWh), their highest since late December.

Spot gas prices in New England NG-CG-BS-SNL soared 437% to $26 per mmBtu, also their highest since late December. At those prices, it makes sense for some New England power generators to burn oil instead of gas. The region was currently getting about 11% of its generation from oil and 24% from gas.

On average, about 50% of the power generated in New England comes from gas with less than 1% from oil. But on the coldest days, oil-fired generators can produce over 20% of the grid's power.

That's because most of the pipeline gas going to New England is used to heat homes and businesses on those cold days, forcing generators to rely on more expensive oil and LNG.

Week ended Feb 3 (Forecast)

Week ended Jan 27 (Actual)

Year ago Feb 3

Five-year average Feb 3

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

-185

-151

-228

-171

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

2,398

2,583

2,133

2,249

U.S. total storage versus 5-year average

6.6%

+6.7%

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

2.49

2.46

4.46

6.54

3.60

Title Transfer Facility (TTF) TRNLTTFMc1

18.81

18.11

26.94

40.50

14.39

Japan Korea Marker (JKM) JKMc1

18.37

18.97

25.82

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

385

388

452

420

413

U.S. GFS CDDs

4

5

3

5

4

U.S. GFS TDDs

389

393

455

425

417

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

96.0

94.9

91.7

87.7

U.S. Imports from Canada

8.3

8.4

8.4

10.2

9.1

U.S. LNG Imports

0.0

0.0

0.0

0.2

0.2

Total U.S. Supply

106.8

104.3

103.3

102.1

97.0

U.S. Demand (bcfd)

U.S. Exports to Canada

2.6

2.2

2.2

2.2

2.7

U.S. Exports to Mexico

5.3

5.1

5.3

6.0

5.2

U.S. LNG Exports

12.5

12.6

12.4

12.3

6.6

U.S. Commercial

16.5

18.3

16.2

19.4

16.4

U.S. Residential

27.9

31.4

27.0

33.3

27.7

U.S. Power Plant

32.3

33.6

31.0

29.6

28.1

U.S. Industrial

25.7

26.1

24.8

26.0

25.2

U.S. Plant Fuel

4.9

4.7

4.7

4.9

4.8

U.S. Pipe Distribution

2.9

3.1

2.8

2.9

3.1

U.S. Vehicle Fuel

0.1

0.1

0.1

0.1

0.1

Total U.S. Consumption

110.4

117.4

106.8

116.2

105.4

Total U.S. Demand

130.8

137.3

126.7

136.7

119.9

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

Week ended Feb 3

Week ended Jan 27

Week ended Jan 20

Week ended Jan 13

Week ended Jan 6

Wind

10

11

13

11

12

Solar

2

2

2

2

2

Hydro

7

7

7

7

7

Other

2

2

2

2

2

Petroleum

Natural Gas

39

38

36

38

36

Coal

21

19

18

19

18

Nuclear

20

21

21

21

23

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

Hub

Current Day

Prior Day

Henry Hub NG-W-HH-SNL

2.67

2.65

Transco Z6 New York NG-CG-NY-SNL

22.19

4.13

PG&E Citygate NG-CG-PGE-SNL

5.35

17.41

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

2.64

2.50

Chicago Citygate NG-CG-CH-SNL

2.85

2.67

Algonquin Citygate NG-CG-BS-SNL

26.06

12.75

SoCal Citygate NG-SCL-CGT-SNL

6.00

15.86

Waha Hub NG-WAH-WTX-SNL

2.24

2.52

AECO NG-ASH-ALB-SNL

2.24

2.22

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

Hub

Current Day

Prior Day

New England EL-PK-NPMS-SNL

237.25

99.00

PJM West EL-PK-PJMW-SNL

145.25

40.50

Ercot North EL-PK-ERTN-SNL

29.75

42.00

Mid C EL-PK-MIDC-SNL

52.43

152.50

Palo Verde EL-PK-PLVD-SNL

65.00

89.00

SP-5 EL-PK-SP15-SNL

66.00

145.50

(Reporting by Scott DiSavino; Editing by David Gregorio)

((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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