U.S. natgas futures jump 7% on colder weather forecasts, heating demand

U.S. natural gas futures soared about 7% on Tuesday from an 18-month low in the prior session as gas started to flow to the long-shut Freeport LNG export plant in Texas and on forecasts for colder weather and more heating demand over the next two weeks than previously expected.

Freeport started receiving gas from pipelines over the long U.S. Martin Luther King Jr. holiday weekend, according to data from Refinitiv, a possible sign the plant is finally moving closer to exiting an outage.

Front-month gas futures for February delivery were up 24.4 cents, or 7.1%, to $3.663 per million British thermal units (mmBtu) at 9:59 a.m. EST (1459 GMT). On Friday the contract settled at its lowest price since June 24, 2021.

Tuesday’s gain would be the biggest daily percentage increase since the middle of December. It also pushed the contract out of technically oversold territory for the first time in five days.

Last week, gas speculators boosted their net short futures and options positions on the New York Mercantile and Intercontinental Exchanges for a fourth week in a row to the most since March 2020, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.

Traders said the biggest market uncertainty remains when Freeport LNG’s export plant in Texas will return to service after shutting due to a fire on June 8, 2022.

Gas started flowing to the Freeport plant on Jan. 14 and was on track to reach 69 million cubic feet per day (mmcfd) on Tuesday, according to data from Refinitiv.

Officials at Freeport said on Tuesday the plant was still on track to restart in the second half of January, pending regulatory approvals.

Freeport’s restart timeline, however, has been delayed many times from October to November to December and then most recently to January.

Even when the company was saying the plant could restart last year, many analysts said it would likely take Freeport until the first or second quarter of 2023 to get the plant ready due to the large amount of work needed to satisfy federal regulators, including training staff in new safety procedures.

Last week, after sources told Reuters the plant would not return until February or later, at least two LNG vessels gave up on Freeport and moved to other ports, according to ship tracking data from Refinitiv.

Whenever the Freeport plant returns, U.S. gas demand 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.

Even though some vessels have turned away from Freeport, a few tankers, including Prism Diversity, Prism Courage and Prism Agility, were still waiting in the Gulf of Mexico to pick up LNG from the plant. Some have been there since early November.

In addition, other ships were still sailing toward Freeport, including Prism Brilliance, Kmarin Diamond and Wilforce, and are expected to reach the plant in late January.

U.S. GAS OUTPUT RISING

Data provider Refinitiv said that average gas output in the U.S. Lower 48 states has risen to 98.6 bcfd so far in January, up from 96.7 bcfd in December. That compares with a monthly record of 99.9 bcfd in November 2022.

With colder weather coming, Refinitiv forecast U.S. gas demand, including exports, would jump from 121.3 bcfd this week to 130.4 bcfd next week. Those forecasts were higher than Refinitiv’s outlook on Friday.

The average amount of gas flowing to U.S. LNG export plants has climbed to 12.2 bcfd so far in January, up from 11.9 bcfd in December. That compares with a monthly record of 12.9 bcfd in March 2022.