U.S. natgas futures drop 5% to 10-month low ahead of storage report

Article content

U.S. natural gas futures dropped about 5% to a 10-month low on Thursday on forecasts

for warmer-than-normal weather to continue into late January.

Article content

That should keep heating demand low during what is usually the coldest part of the year and allow utilities

to pull less gas from storage than usual in coming weeks.

Thursday’s price drop came ahead of a federal report expected to show last week’s storage withdrawal was

much bigger-than-usual because the weather then was still colder-than-normal, prompting consumers to burn lots

Article content

of gas to heat their homes and businesses.

Analysts forecast U.S. utilities pulled 228 billion cubic feet (bcf) of gas from storage during the week

ended Dec. 30. That compares with a decrease of 46 bcf in the same week last year and a five-year (2017-2021)

average decline of 98 bcf.

If correct, last week’s decrease would cut stockpiles to 2.884 trillion cubic feet (tcf), or 6.9% below the

five-year average of 3.099 tcf for this time of year.

Traders said the market’s biggest uncertainty remains when Freeport LNG will restart its liquefied natural

gas (LNG) export plant in Texas.

After several delays from October to November and then to December, Freeport now expects the facility to

return in the second half of January, pending regulatory approvals.

Article content

That is in line with what many analysts have long been saying – that Freeport would likely return during

the first quarter of 2023 because the company still has a lot of work to do to satisfy federal regulators

before restarting the plant.

Whenever Freeport returns, U.S. demand for gas 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.

Freeport shut on June 8 after a pipe failure caused an explosion due to inadequate operating and testing

procedures, and human error and fatigue, according to a report by consultants hired to review the incident and

suggest corrective actions.

Several vessels, including Prism Diversity, Prism Courage, Prism Agility and Elisa Larus, have been waiting

Article content

in the Gulf of Mexico to pick up LNG from Freeport, some since early November.

Other ships were sailing toward the plant, including Corcovado LNG, which is expected to arrive in

mid-January, and Kmarin Diamond and Wilforce expected in late January.

After jumping about 5% on Wednesday, front-month gas futures on Thursday fell 20.8 cents, or 5.0%,

to $3.964 per million British thermal units (mmBtu) at 8:00 a.m. EST (1300 GMT), putting the contract on track

for its lowest close since Feb. 11 for a second time this week. It also closed at its lowest since Feb. 11 on

Tuesday.

That keeps the front-month in technically oversold territory with a relative strength index (RSI) below 30

for a sixth day in a row for the first time since October.

Article content

Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 98.3 bcfd so far in

January, up from 96.7 bcfd in December but still below the monthly record of 99.9 bcfd in November 2022.

Even though the weather is expected to remain warmer-than-normal through late-January, Refinitiv projected

average U.S. gas demand, including exports, would jump from 110.4 bcfd this week to 121.6 bcfd next week as

temperatures ease ahead of what are usually the coldest weeks of the year.

Those demand forecasts were similar to Refinitiv’s outlook on Wednesday.

The average amount of gas flowing to U.S. LNG export plants slid to 11.8 bcfd so far in January, down from

11.9 bcfd in December. That compares with a monthly record of 12.9 bcfd in March.

Article content

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

Week ended Week ended Year ago Five-year

Dec 30 Dec 23 Dec 30 average

(Forecast) (Actual) Dec 30

U.S. weekly natgas storage change (bcf): -228 -213 -46 -98

U.S. total natgas in storage (bcf): 2,884 3,112 3,199 3,099

U.S. total storage versus 5-year average -6.9 -2.7%

Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five Year

Last Year Average Average

2022 (2018-2022)

Henry Hub 4.03 4.17 4.26 6.54 3.60

Title Transfer Facility (TTF) 20.83 20.19 28.25 40.50 14.39

Japan Korea Marker (JKM) 29.50 29.35 28.53 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 30-Year

Article content

Norm Norm

U.S. GFS HDDs 346 335 472 440 445

U.S. GFS CDDs 2 3 4 4 3

U.S. GFS TDDs 348 338 476 444 448

Refinitiv U.S. Weekly GFS Supply and Demand Forecasts

Prior Week Current Week Next Week This Week Five-Year

Last Year Average For

Month

U.S. Supply (bcfd)

U.S. Lower 48 Dry Production 87.0 98.5 98.5 94.0 88.8

U.S. Imports from Canada 10.1 7.9 9.1 9.2 9.4

U.S. LNG Imports 0.0 0.0 0.0 0.1 0.4

Total U.S. Supply 97.0 106.4 107.5 103.3 98.6

U.S. Demand (bcfd)

U.S. Exports to Canada 1.5 3.3 3.3 2.5 2.8

U.S. Exports to Mexico 5.0 4.9 5.1 5.5 5.3

U.S. LNG Exports 10.7 11.8 12.5 12.0 7.2

U.S. Commercial 20.7 12.5 15.1 19.3 17.1

U.S. Residential 36.0 19.9 24.7 33.1 29.8

U.S. Power Plant 33.8 26.9 28.5 30.5 28.5

U.S. Industrial 26.8 23.7 24.8 26.2 25.6

Article content

U.S. Plant Fuel 4.3 4.9 4.9 4.9 4.9

U.S. Pipe Distribution 3.3 2.4 2.7 2.4 2.4

U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1

Total U.S. Consumption 125.0 90.4 100.8 116.5 108.4

Total U.S. Demand 142.1 110.4 121.6 136.5 123.7

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

Week ended Week ended Week ended Week ended Week ended

Jan 6 Dec 30 Dec 23 Dec 16 Dec 9

Wind 13 11 9 12 9

Solar 2 2 2 2 2

Hydro 7 6 6 6 6

Other 2 2 2 2 2

Petroleum 0 1 0 0 0

Natural Gas 34 35 37 37 39

Coal 18 23 24 20 20

Nuclear 24 19 19 20 21

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

Hub Current Day Prior Day

Henry Hub 3.75 3.64

Transco Z6 New York 3.28 2.65

PG&E Citygate 18.60 23.36

Dominion South 2.82 2.27

Chicago Citygate 3.42 3.34

Algonquin Citygate 4.10 2.85

SoCal Citygate 20.18 26.18

Waha Hub 1.81 2.40

AECO 3.21 2.98

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

Hub Current Day Prior Day

New England 45.00 43.47

PJM West 42.50 38.75

Ercot North 33.50 25.75

Mid C 60.68 56.00

Palo Verde 183.00 212.75

SP-5 189.50 225.00

(Reporting by Scott DiSavino

Editing by Bernadette Baum)