U.S. natgas rallies 10% as cold weather seen boosting demand

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U.S. natural gas futures jumped more than 10% to their highest in over a week on Monday, driven by forecasts for colder than normal weather and higher heating demand over the next two weeks.

Front-month gas futures for January delivery on the New York Mercantile Exchange were last up 56.1 cents, or 9%, at $6.806 per million British thermal units (mmBtu) at 9:56 a.m. EST (1456 GMT), the highest since Dec. 1.

“The difference between today’s weather models versus Friday’s weather models are hinting at much more of gas weighted heating degree days… which has subsequently tightened the supply-demand balance,” said Robert DiDona of Energy Ventures Analysis.

“This tighter market condition is ultimately driving the price rise that we’re seeing today.”

Data provider Refinitiv forecast 504 heating degree days (HDDs), which are used to estimate demand to heat homes and businesses, over the next two weeks in the Lower 48 U.S. states, compared with a 30-year average of 409 HDDs for the period.

With colder weather coming, Refinitiv projected average U.S. gas demand, including exports, would rise from 123.4 billion cubic feet per day (bcfd) this week to 145.8 bcfd next week.

“With the charts seeing a rapid shift from bearish to bullish, further price gains toward the $8 area should not be ruled out if a broad-based severe cold snap continues into year’s end,” energy consulting firm Ritterbusch and Associates said in a note.

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“The possibility that Freeport LNG could return to partial operation early next month is also a bullish consideration.”

Freeport LNG had announced that it will delay the planned restart of its liquefied natural gas (LNG) export plant in Texas from mid-December to the end of the year. That delay should keep LNG exports below record levels hit in March and leave more gas in the United States for domestic use.

Some analysts do not expect Freeport to return until January, February or later because it will likely take federal pipeline safety regulators longer than Freeport expects to review and approve the plant’s restart plan once the company submits it.

The Freeport plant, which can turn about 2.1 bcfd of gas into LNG, shut on June 8 due to an explosion caused by inadequate operating and testing procedures, human error and fatigue, according to a report by consultants hired to review the incident and suggest corrective actions.

U.S. gas futures are up about 82% so far this year as much higher global prices feed demand for U.S. exports due to supply disruptions and sanctions linked to Russia’s war in Ukraine.

Gas was trading at $39 per mmBtu at the Dutch Title Transfer Facility (TTF) in Europe and $33 at the Japan Korea Marker (JKM) in Asia.