U.S. Natgas Prices Slide 3% to Nine-Month Low on Rising Output, Lower Demand

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U.S. natural gas futures slid about 3% to a nine-month low on Tuesday as output slowly rises, the amount of gas flowing to liquefied natural gas (LNG) export plants declines and on forecasts for lower demand this week than previously expected.

Prices fell even though the latest forecasts called for colder weather and more heating demand in mid- to late-February than initially forecast.

Traders noted output was rising as gas wells continue to return to service after freezing during extreme cold in mid-January, while LNG feedgas remained low due mostly to an ongoing unit outage at Freeport LNG’s export plant in Texas.

Front-month gas futures for March delivery on the New York Mercantile Exchange (NYMEX) fell 5.9 cents, or 2.8%, to $2.023 per million British thermal units (mmBtu) at 9:29 a.m. EST (1429 GMT), putting the contract on track for its lowest close since April 13, 2023.

That pushed the front-month back into technically oversold territory for a fourth time in five trading days.

Rising price volatility in recent weeks has increased interest in gas trading with open interest in NYMEX futures rising to 1.498 million contracts on Feb. 2, the most since February 2020, for a fourth day in a row.

In other news, over 153,000 homes and businesses were still without power in California early Tuesday following massive storms over the weekend, according to PowerOutages.us. In total, the storms knocked out service to over 1.1 million customers, according to local utilities.

SUPPLY AND DEMAND

Financial company LSEG said gas output in the U.S. Lower 48 states rose to an average of 105.4 billion cubic feet per day (bcfd) so far in February from 102.1 bcfd in January. That, however, remained below the monthly record high of 106.3 bcfd in December.

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Meteorologists projected temperatures in the Lower 48 states would remain warmer than normal through Feb. 13 before sliding to near normal levels from Feb. 15-21.

With seasonally colder weather coming, LSEG forecast U.S. gas demand in the Lower 48, including exports, would rise from 121.8 bcfd this week to 124.6 bcfd next week. The forecast for this week was lower than LSEG’s outlook on Monday, while the forecast for next week was higher.

Gas flows to the seven big U.S. LNG export plants slid to an average of 13.6 bcfd so far in February, down from 13.9 in January and a monthly record high of 14.7 bcfd in December.

Analysts said U.S. LNG feedgas would likely not return to record levels until Freeport LNG returned to full power, which is expected to occur in mid- to late-February.

The U.S. became the world’s biggest LNG supplier in 2023, ahead of recent leaders Australia and Qatar, as much higher global prices fed demand for more exports due in part to supply disruptions and sanctions linked to Russia’s war in Ukraine.

Gas was trading around $9 per mmBtu at both the Dutch Title Transfer Facility (TTF) benchmark in Europe and the Japan Korea Marker (JKM) benchmark in Asia.

(Reporting by Scott DiSavino, editing by David Ljunggren)