U.S. Natural Gas Futures Surge 6% on Freezing Wells, Northeast Price Spike
(Reuters) — U.S. natural gas futures jumped about 6% in another volatile day of trade on Wednesday on forecasts for more heating demand than previously expected and as freezing wells cut output.
Extreme cold in the Northeast, meanwhile, boosted spot gas prices to their highest since January 2024.
Front-month gas futures for February delivery on the New York Mercantile Exchange rose 20.2 cents, or 5.9%, to settle at $3.651 per million British thermal units.
The market has experienced fierce price swings over the past couple of weeks with nine of the past 10 trading days moving up or down by more than 5%. That compares with an average daily price move of around 3.7% in 2024.
The U.S. Energy Information Administration (EIA) said utilities pulled 40 billion cubic feet (Bcf) of gas out of storage during the week ended Jan. 3. Analysts noted that withdrawal was small due to mild weather during the New Year's holiday week.
It was smaller than the 53-Bcf withdrawal analysts forecast in a Reuters poll and compares with a decrease of 104 Bcf during the same week last year and a five-year average draw of 93 Bcf for this time of year.
EIA released the storage report one day early due to a National Day of Mourning for former U.S. President Jimmy Carter on Thursday.
Analysts projected the next three storage reports for the weeks ended Jan. 10, 17 and 24 could show utilities pulling over 200 bcf of gas out of storage each week due to extreme cold expected to last until at least late January. If correct, that could wipe out the current surplus of gas in storage, which stands at 7% over the five-year average, by the end of January.
In the spot market, extreme cold in the Northeast boosted next-day gas prices to their highest since January 2024 at the Eastern Gas hub in Pennsylvania and in New York.
Supply and Demand
Financial firm LSEG said average gas output in the Lower 48 U.S. states slid to 103.0 billion cubic feet per day (Bcf/d) so far in January, down from 103.8 Bcf/d in December. That compares with a record 105.3 Bcf/d in December 2023.
But since daily output hit a 10-month high of 106.0 Bcf/d on Dec. 30, supplies were on track to drop by around 6.2 Bcf/d to a preliminary eight-week low of 99.8 Bcf/d on Wednesday due mostly to freezing oil and gas wells, known in the energy industry as freeze-offs. The amount of freeze-offs, however, was lower than the 6.6 Bcf/d projected on Tuesday.
Output declines so far this year have been much smaller than previous winters. But with the coldest weather still to come, analysts said freeze-offs could increase in coming days.
In past winters, freeze-offs slashed gas output by around 16.5 Bcf/d from Jan. 8-16 in 2024, 19.4 Bcf/d from Dec. 21-24 in 2022 and 20.4 Bcf/d from Feb. 8-17 in 2021, according to LSEG data.
Meteorologists projected weather in the Lower 48 states would remain colder than normal through Jan. 23, with the coldest days now expected early next week.
With colder weather coming, LSEG forecast average gas demand in the Lower 48, including exports, would rise from 146.8 Bcf/d this week to 147.9 Bcf/d next week. The forecast for this week was higher than LSEG's outlook on Tuesday, while its forecast for next week was lower.
On a daily basis, LSEG projected total gas use could reach 157.5 Bcf/d on Jan. 14, which would fall well short of the daily record of 168.4 Bcf/d on Jan. 16, 2024.
The amount of gas flowing to the eight big U.S. LNG export plants rose to an average of 15.0 Bcf/d so far in January, up from 14.4 Bcf/d in December. That compares with a monthly record high of 14.7 Bcf/d in December 2023.
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