U.S. natural gas futures gain 2% on colder forecast for this week

(Reuters) - U.S. natural gas futures rose about 2% on Monday from a 25-month low in the prior session on forecasts for colder weather and higher heating demand this week than previously expected. Meteorologists forecast the weather would remain mostly warmer than normal through Feb. 20 except for a few cold days around the Feb. 18-19 weekend.

Traders noted cold on the weekend does not boost gas use as much as cold during the workweek because usage is low on weekends when many businesses shut. That price increase came despite forecasts for warmer weather and less heating demand next week and a growing belief that Freeport LNG’s export terminal in Texas will soon start pulling in more gas to produce liquefied natural gas (LNG). Analysts, however, have said they still do not expect Freeport to return to full LNG production until mid-March or later.

Japanese energy company Osaka Gas, one of Freeport's five big customers, posted a $9.9 million loss for the April-December period. The company said part of the reason for the loss was that it had to buy more expensive LNG from other suppliers due to the Freeport outage. Osaka said it was not counting on getting LNG from Freeport by the end of March. That was the same thing another big Freeport customer, Japanese energy firm JERA, said on Jan. 30.

Freeport LNG told Texas state regulators last week that it would start sending gas to one of three liquefaction trains at its long-shut export plant. The plant is waiting for permission from federal regulators to start loading LNG to free up space in its storage tanks. The liquefaction trains turn gas into LNG for export. Freeport, the second biggest U.S.LNG export plant, shut after a fire in June 2022. The energy market expects gas prices to rise once the plant starts producing LNG again. When operating at full power, Freeport can turn about 2.1 billion cubic feet (bcf) of gas into LNG each day. That is about 2% of total U.S. daily gas production.

Federal regulators will hold a public meeting on Freeport on Feb. 11 to provide members of the community and other interested parties an opportunity to voice their concerns about Freeport's restart plans and get an update on what's happening at the plant. Even though some vessels have turned away from Freeport in recent weeks, including possibly the Prism Courage, several tankers were still waiting in the Gulf of Mexico to pick up LNG from the plant, including Prism Agility (Jan. 2), Prism Brilliance (Jan. 26), Kmarin Diamond (Jan. 26) and Nohshu Maru (Jan. 31). Prism Courage, which had been sitting outside Freeport since early November, moved away from the plant and was now listed as available "for orders," according to Refinitiv ship tracking data.

Front-month gas futures for March delivery rose 4.7 cents, or 2.0%, to settle at $2.457 per million British thermal units (mmBtu). On Friday, the contract closed at its lowest since December 2020. "It is interesting to note that the March contract is trading under the lower demand ‘shoulder season’ April and May contracts. Historically speaking, the winter contracts ... typically trade at notable premiums to the demand-minimum Spring contracts," analysts at energy consulting firm Gelber & Associates said in a note.

Futures were trading at $2.55 per mmBtu for April and $2.68 for May. On a daily basis, gas production was on track to reach 96.1 billion cubic feet per day (bcfd) on Monday, up from a five-week low of 93.9 bcfd on Feb. 1 when extreme cold cut output by freezing oil and gas wells - known as freeze-offs - in several states, including Texas, New Mexico, Oklahoma and Pennsylvania.



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