U.S. Natural Gas Prices Surge 10% as Winter Storms Hit Output and Demand
(Reuters) — U.S. natural gas futures soared about 10% to a one-week high in volatile trade on Monday as winter storms battered the eastern half of the country, causing output to decline as some oil and gas wells and pipes froze.
More than 323,000 homes and businesses were without power from Missouri to Virginia Monday afternoon. That was down from a total of more than 409,000 customers affected by the storm.
In addition to the winter storms, energy traders said gas prices also gained support from near-record gas flows to U.S. liquefied natural gas (LNG) export plants and forecasts for colder weather and higher heating demand over the next two weeks than previously expected.
Front-month gas futures for February delivery on the New York Mercantile Exchange rose 31.8 cents, or 9.5%, to settle at $3.672 per million British thermal units (MMBtu), their highest close since Dec. 30.
With big price swings in recent weeks, Monday's gain was only the biggest daily percentage increase since prices jumped by 12.0% on Dec. 30.
Supply and Demand
Financial firm LSEG said average gas output in the Lower 48 U.S. states rose to 105.0 billion cubic feet per day (Bcf/d) so far in January, up from 103.8 Bcf/d in December. That compares with a record 105.3 Bcf/d in December 2023.
But since output hit a 10-month high of 106.0 Bcf/d on Dec. 30, supplies were on track to drop by around 3.4 Bcf/d to a preliminary six-week low of 102.6 Bcf/d on Monday due mostly to freezing wells and pipes, known in the energy industry as freeze-offs.
Those output declines from freeze-offs so far this winter were much smaller than in recent years. But with the coldest weather still to come, analysts said freeze-off declines will likely 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 mostly colder than normal through Jan. 21 with the coldest days expected later this week.
LSEG forecast average gas demand in the Lower 48, including exports, would ease from 147.0 Bcf/d this week to 146.7 Bcf/d next week. Those forecasts were higher than LSEG's outlook on Friday.
On a daily basis, LSEG projected total gas use could reach 155.5 Bcf/d on Jan. 7, falling well short of the daily record of 168.4 Bcf/d on Jan. 16, 2024 during another brutal winter freeze.
The amount of gas flowing to the eight big U.S. LNG export plants rose to an average of 15.1 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.
The U.S. became the world's biggest LNG supplier in 2023, ahead of recent leaders Australia and Qatar, as much higher global prices feed demand for more exports due in part to supply disruptions and sanctions linked to Russia's invasion of Ukraine in February 2022.
Gas was trading around $14 per MMBtu at both the Dutch Title Transfer Facility (TTF) benchmark in Europe and the Japan Korea Marker (JKM) benchmark in Asia.
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