U.S. natgas eases to 21-month low with warmer weather coming next week
Feb 2 (Reuters) - U.S. natural gas futures eased about 1% on Thursday to a fresh 21-month low on forecasts for the weather to turn mostly warmer than normal through mid February and on a smaller than usual storage withdrawal.
Meteorologists forecast temperatures across much of the U.S. Lower 48 states would remain below normal through Feb. 4 before rising to mostly above-normal levels from Feb. 5 through at least Feb. 17.
The U.S. Energy Information Administration (EIA) said utilities pulled just 151 bcf of gas from storage during the week ended Jan. 27. That was more than the 142 bcf decline analysts forecast, but was smaller than usual for a fourth week in a row as mild weather in January depressed demand for gas for heating.
The small futures price decline came despite forecasts for higher heating demand over the next two weeks than previously expected and growing expectations the Freeport liquefied natural gas (LNG) export plant in Texas could start pulling in big amounts of gas in coming weeks.
On Wednesday, federal regulators approved Freeport's plan to start sending gas to one of the plant's three liquefaction trains, which turn gas into LNG. On Thursday, Freeport asked regulators for permission to start loading LNG on ships to free up space in the storage for the new LNG expected to come from new liquefaction.
Analysts, however, still don't expect Freeport to return to full capacity until mid-March or later.
Freeport, the second-biggest U.S. LNG export plant, shut after a fire in June 2022. The energy market expects gas prices to rise once the plant starts pulling in large amounts of gas. Freeport can turn about 2.1 billion cubic feet (bcf) of gas into LNG each day. That is about 2% of total U.S. daily gas production.
Another factor that supported gas prices earlier in the day was this week's roughly 3.7 billion cubic feet per day (bcfd) drop in gas output to a one-month low of 93.9 bcfd as winter storms freeze oil and gas wells - known as freeze-offs - in several states, including Texas, Oklahoma, New Mexico and Pennsylvania.
The U.S. Energy Information Administration (EIA) said utilities pulled just 151 bcf of gas from storage during the week ended Jan. 27. That was more than the 142 bcf decline analysts forecast, but was smaller than usual for a fourth week in a row as mild weather in January depressed demand for gas for heating.
Front-month gas futures for March delivery on the New York Mercantile Exchange (NYMEX) fell 1.2 cents, or 0.5%, to settle at $2.456 per million British thermal units, their lowest close since April 2021 for a second day in a row.
That kept the contract in oversold territory with a relative strength index (RSI) below 30 for a fourth day in a row and the 17th time so far this year.
With interest in gas markets rising in recent weeks, open interest in the NYMEX front-month jumped to over 297,000 contracts on Wednesday, its highest since August 2021 for a third day in a row.
Shares traded in the U.S. Natural Gas Fund , an exchange-traded fund (ETF) designed to track the daily price movement of gas, reached a record high of 48.7 million on Wednesday, blowing past the prior all-time high of 43.1 million in November 2018.
UNG shares outstanding, meanwhile, have more than doubled over the past four weeks to an all-time high of 81.2 million on Wednesday after hitting fresh record highs every day since Jan. 13.
Refinitiv forecast U.S. gas demand, including exports, would drop from 137.4 bcfd this week to 128.1 bcfd next week. Those forecasts were higher than Refinitiv's outlook on Wednesday.
The average amount of gas flowing to U.S. LNG export plants rose to 12.6 bcfd so far in February, up from 12.3 bcfd in January. That compares with the monthly record of 12.9 bcfd in March 2022 before Freeport shut.
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