U.S. Natgas Futures Ease Ahead of Weekly Storage Report

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U.S. natural gas futures eased about 1% on Thursday ahead of a federal report expected to show a bigger than usual storage build and after forecasts for milder weather and lower heating demand this week than previously expected.

That small price decline came despite forecasts for colder weather and higher heating demand next week than previously expected, and a preliminary drop in U.S. daily output.

Prices fell even though the amount of gas flowing to U.S. liquefied natural gas (LNG) export plants remained on track to hit a record high for a second straight month in April after Freeport LNG’s export plant in Texas exited an eight-month outage in February.

Analysts said last week’s storage build was bigger than usual for this time of year because mild weather kept heating demand low. They forecast U.S. utilities added 69 billion cubic feet (bcf) of gas into storage during the week ended April 14.

That compares with an increase of 47 bcf in the same week last year and a five-year (2018-2022) average increase of 41 bcf.

If correct, last week’s increase would boost stockpiles to 1.924 trillion cubic feet (tcf), or 20.2% above the five-year average for this time of year.

Front-month gas futures for May delivery on the New York Mercantile Exchange were down 1.7 cents, or 0.8%, to $2.205 per million British thermal units at 7:51 a.m. EDT (1151 GMT).

The market, which dropped about 6% on Wednesday, has been extremely volatile over the past month or so, with the front-month gaining or losing more than 5% on 11 of the past 21 trading days.

Freeport LNG’s export plant, which shut in June 2022 after a fire, was on track to pull in about 2.2 billion cubic feet per day (bcfd) of gas on Thursday, according to data provider Refinitiv.

That is the same as the plant has been pulling in during most of April, which is above the 2.1 bcfd of gas Freeport LNG can turn into LNG for export.

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LNG plants usually pull in a little more gas than they can turn into LNG, because they use some of the fuel to power equipment.

Average gas flows to all seven big U.S. LNG export plants rose to 14.1 bcfd so far in April, up from a record 13.2 bcfd in March.

The seven big U.S. LNG export plants 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 100.2 bcfd so far in April, up from 99.7 bcfd in March. That compares with a monthly record of 100.4 bcfd in January.

On a daily basis however output was on track to drop about 2.3 bcfd over the past few days to a preliminary 10-week low of 98.4 bcfd on Thursday, due mostly to declines in Pennsylvania and West Virginia.

Analysts noted preliminary data is often revised later in the day.

Meteorologists projected the weather in the Lower 48 states would remain mostly colder than normal through May 5.

With the weather expected to turn cooler next week, Refinitiv forecast U.S. gas demand, including exports, would rise from 95.6 bcfd this week to 96.8 bcfd next week.

The forecast for this week was lower than Refinitiv’s outlook on Wednesday, while the forecast for next week was higher.