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US natgas prices slide 2% to 3-year low on small storage decline, mild weather

Credit: REUTERS/Nick Oxford

By Scott DiSavino

Feb 8 (Reuters) - U.S. natural gas futures fell about 2% to a fresh three-year low on Thursday on a small weekly storage withdrawal, near-record output, forecasts that heating demand would be below expectations next week, and as low amounts of gas continue to flow to liquefied natural gas (LNG) export plants due to an outage at Freeport LNG's facility in Texas.

With gas prices now down about 23% since the start of 2024 after collapsing 44% last year, some analysts say gas producers - especially small producers - will likely cut the number of wells they drill to reduce output.

The gas rig count fell by 23% in 2023, leaving just 120 rigs in service, and is so far down by another three rigs this year, according to energy service company Baker Hughes BKR.O. RIG/U

The U.S. Energy Information Administration (EIA) said utilities pulled just 75 billion cubic feet (bcf) of gas out of storage during the week ended Feb. 2.

That was in line with the 76-bcf withdrawal analysts forecast in a Reuters poll and compares with a decrease of 208 bcf in the same week last year and a five-year (2019-2023) average decline of 193 bcf for this time of year. EIA/GASNGAS/POLL

Analysts said the withdrawal was small due to warmer-than-normal weather last week that depressed heating demand.

Front-month gas futures NGc1 for March delivery on the New York Mercantile Exchange were down 4.3 cents, or 2.2%, to $1.924 per million British thermal units (mmBtu) at 10:38 a.m. EST (1538 GMT), putting the contract on track for its lowest close since September 2020 for a second day in a row.

But, looking ahead, market watchers said they expect gas prices to rise in coming days with much colder weather forecast to blanket much of the U.S. in mid- to late-February.

That cold, however, may not last long enough or be intense enough for prices to rise too high. Meteorologists forecast the weather will turn colder than normal from Feb. 17-20 with temperatures on the coldest day averaging about 39 degrees Fahrenheit (4 Celsius) on Sunday, Feb. 18, according to data from financial data company LSEG.

That compares with a normal average of 41 F in the U.S. Lower 48 states on that day.

SUPPLY AND DEMAND

LSEG said gas output in the U.S. Lower 48 states rose to an average of 105.6 billion cubic feet per day (bcfd) so far in February from 102.1 bcfd in January. That, however, was still below the monthly record high of 106.3 bcfd in December.

Meteorologists projected temperatures in the Lower 48 states would remain warmer than normal through Feb. 15 before sliding to mostly near- to below-normal levels from Feb. 16-23.

With seasonally colder weather coming, LSEG forecast U.S. gas demand in the Lower 48, including exports, would rise from 122.7 bcfd this week to 124.5 bcfd next week. The forecast for next week was lower than LSEG's outlook on Wednesday.

Gas flows to the seven big U.S. LNG export plants slid to an average of 13.3 bcfd so far in February, down from 13.9 bcfd in January and a monthly record high of 14.7 bcfd in December.

Analysts said U.S. LNG feedgas would likely not return to record levels until Freeport LNG was back at full power, which could occur in mid- to late-February.

Week ended Feb 2 Actual

Week ended Jan 26 Actual

Year ago Feb 2

Five-year average

Feb 2

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

-75

-197

-208

-193

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

2,584

2,659

2,397

2,336

U.S. total storage versus 5-year average

10.6%

5.1%

Global Gas Benchmark Futures ($ per mmBtu)

Current Day

Prior Day

This Month Last Year

Prior Year Average 2023

Five Year Average (2018-2022)

Henry Hub NGc1

1.99

1.97

2.44

2.66

3.60

Title Transfer Facility (TTF) TRNLTTFMc1

8.76

8.87

16.52

13.04

14.39

Japan Korea Marker (JKM) JKMc1

9.45

9.47

16.87

14.39

14.31

LSEG 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

367

367

341

408

399

U.S. GFS CDDs

2

2

5

6

5

U.S. GFS TDDs

369

369

446

412

404

LSEG U.S. Weekly GFS Supply and Demand Forecasts

Prior Week

Current Week

Next Week

This Week Last Year

Five-Year (2019-2023) Average For Month

U.S. Supply (bcfd)

U.S. Lower 48 Dry Production

105.0

105.7

105.6

101.2

92.4

U.S. Imports from Canada

9.4

9.2

9.5

9.0

9.1

U.S. LNG Imports

0.0

0.0

0.0

0.0

0.2

Total U.S. Supply

114.4

114.8

115.1

110.2

101.7

U.S. Demand (bcfd)

U.S. Exports to Canada

3.4

3.5

3.5

3.0

2.7

U.S. Exports to Mexico

6.4

5.6

6.2

5.1

5.2

U.S. LNG Exports

14.1

13.2

13.1

12.6

8.4

U.S. Commercial

13.8

13.8

14.1

14.9

16.3

U.S. Residential

21.8

22.4

22.8

24.3

27.6

U.S. Power Plant

33.9

31.6

32.0

28.6

29.3

U.S. Industrial

24.5

24.4

24.7

24.4

25.4

U.S. Plant Fuel

5.2

5.2

5.2

5.2

5.3

U.S. Pipe Distribution

2.7

2.7

2.7

2.7

2.7

U.S. Vehicle Fuel

0.1

0.1

0.1

0.1

0.1

Total U.S. Consumption

102.1

100.3

101.6

100.2

106.7

Total U.S. Demand

125.9

122.7

124.5

120.9

123.0

U.S. Northwest River Forecast Center (NWRFC) at The Dalles Dam

Current Day % of Normal Forecast

Prior Day % of Normal Forecast

2023

% of Normal Actual

2022 % of Normal Actual

2021 % of Normal Actual

Apr-Sep

77

77

83

107

81

Jan-Jul

78

78

77

102

79

Oct-Sep

79

79

76

103

81

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

Week ended Feb 9

Week ended Feb 2

Week ended Jan 26

Week ended Jan 19

Week ended Jan 12

Wind

11

9

7

10

14

Solar

3

3

2

2

2

Hydro

7

7

6

6

6

Other

2

2

2

2

2

Petroleum

Natural Gas

39

40

43

39

38

Coal

16

18

22

23

19

Nuclear

21

20

19

17

19

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

Hub

Current Day

Prior Day

Henry Hub NG-W-HH-SNL

1.94

2.10

Transco Z6 New York NG-CG-NY-SNL

1.68

2.04

PG&E Citygate NG-CG-PGE-SNL

3.50

3.45

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

1.62

1.45

Chicago Citygate NG-CG-CH-SNL

1.69

1.83

Algonquin Citygate NG-CG-BS-SNL

2.06

4.29

SoCal Citygate NG-SCL-CGT-SNL

3.01

2.91

Waha Hub NG-WAH-WTX-SNL

1.31

0.98

AECO NG-ASH-ALB-SNL

1.38

1.44

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

Hub

Current Day

Prior Day

New England EL-PK-NPMS-SNL

36.75

48.50

PJM West EL-PK-PJMW-SNL

21.25

26.50

Ercot North EL-PK-ERTN-SNL

16.00

11.50

Mid C EL-PK-MIDC-SNL

51.00

53.43

Palo Verde EL-PK-PLVD-SNL

29.75

35.25

SP-15 EL-PK-SP15-SNL

28.75

35.00

(Reporting by Scott DiSavino)

((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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