U.S. natural gas futures fell about 4% to a two-week low on Friday on forecasts for less cold weather and lower heating demand over the next two weeks than previously expected. That price decline came even though the amount of gas flowing to U.S. liquefied natural gas (LNG) export plants was on track to hit a monthly record high in March after Freeport LNG‘s export plant in Texas exited an eight-month outage in February.
That outage was caused by a fire in June 2022. Front-month gas futures for April delivery fell 11.3 cents, or 4.4%, to settle at $2.430 per million British thermal units (mmBtu), their lowest close since Feb. 23. That put the contract down about 19% for the week after rising about 23% last week. The market has been extremely volatile in recent weeks as traders bet on the latest weather forecasts.
The front-month fell to a 28-month low below $2 per mmBtu in intraday trade on Feb. 22 on forecasts for warmer weather before jumping 9% to settle at a five-week high over $3 just over a week later on March 3 on forecasts for colder weather and then plunging 15% on March 6 on an outlook for warmer temperatures. Freeport LNG’s export plant was on track to pull in 1.0 billion cubic feet per day (bcfd) of gas on Friday, up from 0.9 bcfd on Thursday, according to data provider Refinitiv. When operating at full power, Freeport LNG, the second-biggest U.S. LNG export plant, can turn about 2.1 bcfd of gas into LNG for export.
Federal regulators approved the restart of two of Freeport LNG’s three liquefaction trains (Trains 2 and 3) in February and the third train (Train 1) on March 8. Liquefaction trains turn gas into LNG. Total gas flows to all seven of the big U.S. LNG export plants rose to an average of 13.2 bcfd so far in March from 12.8 bcfd in February. That would top the monthly record of 12.9 bcfd in March 2022, before the Freeport LNG facility shut. The seven big U.S. LNG export plants, including Freeport LNG, 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 98.7 bcfd so far in March from 98.2 bcfd in February. That compares with a monthly record of 99.9 bcfd in November 2022. Analysts said production declined earlier this year due in part to drops in gas prices of 40% in January and 35% in December that persuaded several energy firms to reduce the number of rigs they were using to drill for gas.
In addition, extreme cold in early February and late December cut gas output by freezing oil and gas wells in several producing basins. Meteorologists projected the weather in the Lower 48 states would remain mostly colder-than-normal through March 25 after a couple of near-normal days from March 10-11. That forecast, however, was warmer than previously expected. With colder weather coming, Refinitiv forecast U.S. gas demand, including exports, would rise from 116.4 bcfd this week to 119.2 bcfd next week before sliding to 118.9 bcfd in two weeks when temperatures start to moderate with the coming of spring.
The forecast for this week was higher than Refinitiv’s outlook on Thursday, while its forecast for next week was lower. Milder winter weather so far this year has prompted utilities to leave more gas in storage than usual. Gas stockpiles were about 22% above their five-year average (2018-2022) during the week ended March 3 and were expected to end about 24% above normal during the week ended March 10, according to federal data and analysts’ estimates.
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