NEW YORK: US natural gas futures climbed about 2% on Friday ahead of the long US Presidents Day weekend as some producers planned to reduce drilling in 2024 after prices collapsed to a 3-1/2-year low.
But even if some energy firms reduce gas drilling, analysts said gas output could still increase because oil prices are high enough to encourage producers to seek more oil in shale basins like the Permian in Texas and New Mexico and the Bakken in North Dakota. A lot of associated gas also comes out of the ground with oil in those shale basins.
Friday’s price increase came despite a continued rise in gas output and forecasts for mild weather and low heating demand through early March.
The combination of near-record production, mostly mild weather and low heating demand this winter, other than during the Arctic freeze in mid-January, allowed utilities to leave more gas in storage than usual. Analysts forecast stockpiles were currently around 22% above-normal levels for this time of year.
After falling about 24% during the prior eight days, front-month gas futures for March delivery on the New York Mercantile Exchange rose 2.8 cents, or 1.8%, to settle at $1.609 per million British thermal units (mmBtu).
On Thursday, the contract closed at its lowest since June 2020, which was the height of COVID-19 demand destruction.
That kept the contract in technically oversold territory for a ninth day in a row for the first time since February 2018.
If the front-month turns negative again, traders noted it would have to break through several key levels of technical support before hitting the record low of $1.04 per mmBtu in January 1992, including the psychological $1.50 would be the lowest since June 2020, $1.432 would be the lowest since August 1995, $1.39 would be the lowest since July 1995 and $1.25 would be the lowest since March 1992.
For the week, the contract was down about 13% after losing 11% last week and 23% two weeks ago.
Financial company LSEG said gas output in the US Lower 48 states rose to an average of 105.8 billion cubic feet per day (bcfd) so far in February, up from 102.1 bcfd in January, but still shy of the monthly record of 106.3 bcfd in December.
Meteorologists projected weather across the Lower 48 states would remain mostly warmer than normal through March 2, but for a couple of cold days this weekend, Feb. 17-18.
LSEG forecast US gas demand in the Lower 48, including exports, would rise from 124.4 bcfd this week to 127.7 bcfd next week with the cold weekend before dropping to 121.5 bcfd in two weeks as the weather warms. The forecasts for this week were lower than LSEG’s outlook on Thursday.
Gas flows to the seven big US liquefied natural gas (LNG) export plants slid to an average of 13.6 bcfd so far in February, down from 13.9 bcfd in January and a monthly record of 14.7 bcfd in December.
Analysts do not expect US LNG feedgas to return to record levels until Freeport LNG is back at full power, which could occur in late February.
In other news, the US House of Representatives voted to overturn President Joe Biden’s pause on issuing new permits to LNG projects seeking to sell gas to non-Free Trade Agreement countries.
The US Federal Energy Regulatory Commission (FERC), meanwhile, continued to issue LNG authorizations, granting Tellurian an extension to complete its proposed Driftwood LNG export project in Louisiana and granting ONEOK a presidential permit to build its proposed Saguaro gas pipe across the US-Mexico border.
Saguaro is designed to provide US gas to Mexico Pacific’s proposed LNG export plant in Mexico.
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