U.S. Natural Gas Prices Jump on Storage Draw and Record LNG Feedgas
U.S. natural gas futures climbed to a three-week high after a storage draw in line with forecasts, colder weather outlooks and record LNG feedgas flows boosted demand expectations.
(Reuters) — U.S. natural gas futures extended gains on Dec. 29 to hit a three-week high, after federal data showed storage levels in line with forecasts, as colder weather outlooks and record liquefied natural gas export flows boosted demand expectations.
Front-month gas futures for January delivery on the New York Mercantile Exchange rose 6.7%, to $4.65 per million British thermal units, as of 12:32 PM ET, after hitting its highest level since December 10 earlier in the session.
Gas futures for February, which will soon be the front-month, were up about 3.1% to around $3.99 per MMBtu.
The U.S. Energy Information Administration (EIA) said energy firms pulled 166 billion cubic feet (Bcf) of gas out of storage during the week ended Dec. 19.
That was in line with the 168-bcf withdrawal analysts forecast in a Reuters poll and compares with a decline of 98 Bcf during the same week last year and an average withdrawal of 110 Bcf over the past five years (2020-2024).
"There is overall demand and if we continue to get cold weather, we could see those inventories drop even further. I think it's also reflective of the fact that we're getting cold weather and we're seeing record demand for exports," said Phil Flynn, senior analyst for Price Futures Group.
Meteorologists forecast a slight drop in temperatures nationwide through January 12, with Heating Degree Days rising from 398 on Friday to 412 on Monday, exceeding the near-normal level of 394.
Adding to bullish sentiment, average gas flows to the eight large U.S. liquefied natural gas export plants have risen to 18.5 billion cubic feet per day so far this month, up from a monthly record high of 18.2 billion cubic feet per day in November.
On a daily basis, LNG feedgas was set to reach a three-week high of 18.8 billion cubic feet per day on Monday driven primarily by increased flows to Cheniere Energy's 4.5-billion cubic feet per day Sabine Pass plant in Louisiana, which rose to about 5.1 billion cubic feet per day from an average of 4.9 billion cubic feet per day over the prior seven days, according to LSEG data.
Financial firm LSEG projected average gas demand in the lower 48 states, including exports, would fall slightly from 138.4 billion cubic feet per day this week to 135.8 billion cubic feet per day over the next week. The forecast for this week was higher than LSEG's outlook on Friday.
LSEG said average natural gas output in the lower 48 U.S. states climbed to a record high of 110.1 billion cubic feet per day in December, surpassing November's monthly record of 109.6 billion cubic feet per day.
"Production continues to be strong. If the cold weather doesn't impact production, then prices will stabilize. But if this cold weather settles in for a while, then it looks like we could push prices back above $4 for the February contract," Flynn said.
Dutch and British gas prices rose, with the European benchmark contract hitting a one-month high after the holiday break, driven by strong demand because of cold weather.