NEW YORK: US natural gas futures fell almost 3% to a three-week low on Thursday as output recovers from last week’s freeze and on forecasts for less cold and lower heating demand over the next two weeks than previously expected.
That price drop came despite a storage draw last week that was much bigger than usual for a fourth week in a row due to a cold start to 2022.
The US Energy Information Administration (EIA) said utilities pulled a massive 222 billion cubic feet (bcf) of gas from storage during the week ended Feb. 4. That was the first time withdrawals topped 200 bcf for four weeks in a row since February 2014.
Last week’s withdrawal matched the 222-bcf decline that analysts forecast in a Reuters poll and compares with a decline of 174 bcf in the same week last year and a five-year (2017-2021) average decline of 150 bcf.
The total amount of gas in storage fell to 2.101 trillion cubic feet (tcf), or 9.3% below the five-year average of 2.316 tcf for this time of the year. After weeks of near record volatility, front-month gas futures for March delivery fell 11.6 cents, or 2.9%, to $3.893 per million British thermal units (mmBtu) at 10:33 a.m. EST (1533 GMT), putting the contract on track for its lowest close since Jan. 20.
Data provider Refinitiv said output in the US Lower 48 states fell from a record 97.3 billion cubic feet per day (bcfd) in December to 93.9 bcfd in January and 91.2 bcfd in February as wells in several producing regions froze, including the Permian in Texas and New Mexico, the Bakken in North Dakota and the Appalachia in Pennsylvania, West Virginia and Ohio.
Output has been rising almost daily - hitting 94.2 bcfd on Wednesday - since it dropped to 86.3 bcfd during a winter storm on Feb. 4, its lowest since February 2021.
With cold weather moderating, Refinitiv projected average US gas demand, including exports, would drop from 130.6 bcfd this week to 120.9 bcfd next week. The forecast for next week was lower than Refinitiv’s outlook on Wednesday.
The amount of gas flowing to US liquefied natural gas (LNG) export plants rose to an average of 12.5 bcfd so far in February, which would top January’s monthly record of 12.4 bcfd, as liquefaction trains at Venture Global LNG’s Calcasieu Pass plant in Louisiana enter service. A vessel arrived near Calcasieu on Monday and could pick up the plant’s first LNG cargo this week.
Traders said demand for US LNG would remain strong so long as global gas, prices keep trading well above US futures as utilities around the world scramble for cargoes to meet surging demand in Asia and replenish low inventories in Europe - especially with the threat that Russia could invade Ukraine and cut gas supplies to Europe.