U.S. nat gas futures rose 3% on more feedstocks flowing to LNG terminals and increased heating demand
U.S. natural gas futures rose about 3% to a five-week high on Friday, with the amount of gas flowing to U.S. liquefied natural gas (LNG) export plants set to hit a daily record high and on forecasts for colder weather and higher heating demand in two weeks than previously expected. The amount of gas flowing to LNG export plants was on track to hit a daily record high as Freeport LNG's facility in Texas keeps pulling in more of the fuel after exiting an eight-month outage in February. The plant shut after a fire in June 2022.
Front-month gas futures for April delivery were up 6.9 cents, or 2.5%, to $2.834 per million British thermal units at 8:23 a.m. EST (1323 GMT), putting the contract on track for its highest close since Jan. 27. For the week, the front-month was up about 16%, which would be its biggest weekly gain since late July. It rose about 8% last week.
Freeport LNG's export plant was on track to pull in about 1.4 billion cubic feet per day (bcfd) of gas on Friday, up from 1.2 bcfd on Thursday, according to data provider Refinitiv, a sign the company likely started the second of three liquefaction trains at the plant. Liquefaction trains turn gas into LNG. When operating at full power, Freeport LNG, the second-biggest U.S. LNG export plant, can turn about 2.1 bcfd of gas into LNG for export. Freeport LNG said on Feb. 21 that it could be consuming about 2.0 bcfd of feedgas "over the next several weeks." Some analysts have said that Freeport LNG will likely not return to full capacity until the end of April. Federal regulators have already approved the restart of two of Freeport LNG's three liquefaction trains (Trains 2 and 3).
On Monday, Freeport LNG asked regulators for permission to restart the third (Train 1). The total amount of gas flowing to U.S. LNG export plants has risen to 13.4 bcfd so far in March from 12.8 bcfd in February. That compares with a monthly record of 12.9 bcfd in March 2022 before the Freeport LNG facility shut. The seven big U.S. LNG export plants, including Freeport LNG, can turn about 13.8 bcfd of gas into LNG.
SUPPLY AND DEMAND
Refinitiv said average gas output in the U.S. Lower 48 states has risen to 98.4 bcfd so far in March from 98.2 bcfd in February. That compares with a monthly record of 99.9 bcfd in November 2022. Analysts said production declined earlier this year due in part to recent drops in gas prices of 40% in January and 35% in December that caused several energy firms to reduce the number of rigs they were using to drill for gas. In addition, extreme cold in early February and late December cut gas output by freezing oil and gas wells in several producing basins. Meteorologists forecast the weather in the Lower 48 states would remain mostly colder-than-normal through March 18 after some warmer-than-normal days from March 3-6.
Refinitiv forecast U.S. gas demand, including exports, would ease from 120.9 bcfd this week to 119.1 bcfd next week, mostly on expectations that power generators would burn less gas to produce electricity, before jumping to 127.4 bcfd in two weeks when the weather turns colder and heating demand picks up. Mostly mild weather in recent months has prompted utilities to leave more gas in storage than normal for this time of year. Gas stockpiles were about 19% above their five-year average (2018-2022) in the week ended Feb. 24 and were expected to end up about 22% above normal during the week ended March 3, according to federal data and analysts' estimates.
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