US natgas prices hold near 2-year high as lower flows to Freeport LNG offset cold weather forecasts

NEW YORK: US natural gas futures held near a two-year high on Monday as forecasts for colder weather and more heating demand next week than previously expected offset a reduction in the amount of gas curtailed by freezing pipes and lower flows to Freeport LNG’s export plant in Texas.

After soaring about 10% to a two-year high earlier in the session, front-month gas futures for February delivery on the New York Mercantile Exchange were down 1.5 cents, or 0.4%, to $3.974 per million British thermal units at 9:41 a.m. EST (1441 GMT). 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 US Henry Hub benchmark in Louisiana and the Eastern Gas South hub 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.

Financial firm LSEG said average gas output in the Lower 48 US states has slid to 103.1 billion cubic feet per day (bcfd) so far in January, down from 104.2 bcfd in December. That compares with a record 104.5 bcfd 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 bcfd from Jan. 4-7 on Monday, down from a projected 5.9 bcfd 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 bcfd from Jan. 8-16 in 2024, 19.4 bcfd from Dec. 21-24 in 2022, and 20.4 bcfd 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 bcfd this week to 149.2 bcfd 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 bcfd on Jan. 8 and would reach 165.1 bcfd on Jan. 21. That, however, would fall short of the daily record high of 168.4 bcfd on Jan. 16, 2024.

The amount of gas flowing to the eight big US LNG export plants has risen to an average of 15.0 bcfd so far in January, up from 14.4 bcfd in December. That compares with a monthly record high of 14.7 bcfd in December 2023. On a daily basis, LNG feedgas was on track to slide from an all-time high of 15.5 bcfd on Jan. 11 to 14.4 bcfd on Monday due mostly to reduced flows to Freeport LNG’s 2.1-bcfd plant in Texas. Separately, flows to Venture Global LNG’s 2.6-bcfd Plaquemines export plant under construction in Louisiana were on track to rise to a record 1.0 bcfd on Sunday and Monday.