U.S. Natural Gas Futures Jump 4% on Cooler Weather, Lower Output
U.S. natural gas futures jumped 4% as forecasts for cooler weather and lower production boosted near-term heating demand, even as longer-dated prices remained under pressure.
(Reuters) — U.S. natural gas futures jumped about 4% on Jan. 7 on a decline in output and forecasts for cooler weather and more heating demand this week than previously expected.
Front-month gas futures for February delivery on the New York Mercantile Exchange rose 14.4 cents, or 4.3%, to $3.494 per million British thermal units. On Jan. 6, the contract closed at its lowest price since Oct. 28.
Looking ahead, however, the 12-month futures strip fell to $3.46 per MMBtu, its lowest price since December 2024.
Supply and Demand
Financial firm LSEG said average gas output in the Lower 48 states has fallen to 109.0 billion cubic feet per day (billion cubic feet per day) so far in January, down from a monthly record high of 109.7 billion cubic feet per day in December.
On a daily basis, output was on track to drop to a three-week low of around 108.1 billion cubic feet per day on Wednesday due in part to declines in Arkansas and Texas, down from 108.5 billion cubic feet per day on Jan. 6 and a daily record high of 111.1 billion cubic feet per day on December 21, according to LSEG data.
Despite a slight cooldown in the forecasts, meteorologists projected weather across the country would remain mostly warmer than normal through January 22, keeping the amount of gas needed to heat homes and businesses lower than usual for this time of year.
LSEG projected average gas demand in the Lower 48 states, including exports, would rise from 131.2 billion cubic feet per day this week to 132.4 billion cubic feet per day next week. The forecast for this week was higher than LSEG's outlook on Jan. 6.
Average gas flows to the eight large U.S. LNG export plants have risen to 18.6 billion cubic feet per day so far in January, up from a monthly record high of 18.5 billion cubic feet per day in December.
The U.S. became the world's biggest LNG exporter in 2023, surpassing Australia and Qatar, as surging global prices fed demand for more exports, due in part to supply disruptions and sanctions linked to Russia's 2022 invasion of Ukraine.
Gas was trading around $10 per MMBtu at both the Dutch Title Transfer Facility (TTF) benchmark in Europe and the Japan-Korea Marker (JKM) benchmark in Asia.
Global prices have declined to multi-month lows over the past month or so on hopes that peace talks over Ukraine could result in the lifting of sanctions against Moscow. Such a development could allow Russia, the world's second-biggest gas producer behind the U.S., to export more fuel in the future.