U.S. Natural Gas Prices Dip from 2-Year High on Higher Output, Lower Freeport LNG Flows

(Reuters) — U.S. natural gas futures eased about 1% on Monday from a two-year high in the prior session on a reduction in the amount of gas curtailed by freezing pipes and lower flows to Freeport LNG's export plant in Texas.

Prices declined despite forecasts for colder weather and more heating demand next week than previously expected.

After soaring by about 10% to a two-year high earlier in the session, front-month gas futures for February delivery on the New York Mercantile Exchange fell 5.5 cents, or 1.4%, to settle at $3.934 per million British thermal units. On Friday, the contract closed at its highest price since Jan. 4, 2023.

In the spot market, extreme cold blanketing parts of the country boosted next-day gas prices at the U.S. Henry Hub benchmark in Louisiana and the Eastern Gas South hub <NG-PCN-APP-SNL> to their highest levels since January 2024.

Analysts projected the next three storage reports for the weeks ending Jan. 10, 17 and 24 could each show utilities pulling more than 200 billion cubic feet (bcf) of gas from inventories to meet soaring heating demand. Some analysts said withdrawals this month could top the current record high of 994 bcf set in January 2022, according to federal energy data.

Those storage withdrawals could wipe out the current surplus of gas in storage, which stands near 7% over the five-year average, by the end of January. That would be the first time stockpiles would fall below the five-year average since January 2022.

Supply and Demand

Financial firm LSEG said average gas output in the Lower 48 U.S. states slid to 103.1 billion cubic feet per day (Bcf/d) so far in January, down from 104.2 Bcf/d in December. That compares with a record 104.5 Bcf/d in December 2023.

Over the weekend, LSEG slashed estimated production curtailments due to freezing oil and gas wells and pipes so far this year to just 1.4 Bcf/d from Jan. 4-7 on Monday, down from a projected 5.9 Bcf/d from Dec. 31-Jan. 10 on Friday. The energy industry calls those curtailments freeze-offs.

In past winters, freeze-offs cut 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 mostly colder than normal through Jan. 28, with the coldest day still to come on Jan. 21.

With colder weather coming, LSEG forecast average gas demand in the Lower 48, including exports, would rise from 144.4 Bcf/d this week to 149.2 Bcf/d next week. The forecast for this week was lower than LSEG's outlook on Friday, while its forecast for next week was higher.

On a daily basis, LSEG said total gas use so far this winter peaked at 158.9 Bcf/d on Jan. 8 and would reach 165.1 Bcf/d on Jan. 21. That, however, would fall short of the daily record high 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.

On a daily basis, LNG feedgas was on track to slide from an all-time high of 15.5 Bcf/d on Jan. 11 to 14.4 Bcf/d on Monday due mostly to reduced flows to Freeport LNG's 2.1-Bcf/d plant in Texas.

Separately, flows to Venture Global LNG's 2.6-Bcf/d Plaquemines export plant under construction in Louisiana were on track to rise to a record 1.0 Bcf/d on Sunday and Monday.

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