UPDATE 2-U.S. natgas futures jump 5% on higher demand forecast

Reuters
Updated ·6 min read
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(Adds latest prices) Jan 9 (Reuters) - U.S. natural gas futures jumped about 5% on Monday on forecasts for slightly more heating demand next week than previously expected and as short sellers take profits after prices fell to a one-year low last week. "The February natural gas contract is rebounding ... on overdue profit-taking by shorts," analysts at energy consulting firm EBW Analytics told customers, noting gas futures fell to an intraday low of $3.52 per million British thermal units (mmBtu) on Friday, their lowest since July 2021. That continues last year's record volatility with the contract now up or down over 5% on three of the five trading days so far this year. Front-month gas futures for February delivery rose 20.0 cents, or 5.4%, to settle at $3.910 per mmBtu. On Friday, the contract closed at its lowest since Dec. 30, 2021. Monday's price increase pushed the gas contract out of technically oversold territory for the first time in eight days. But after posting its worst start to a year on record, U.S. gas futures were still down about 13% so far this year after rising 20% in 2022. Last week's price drop caused gas speculators to boost their net short futures and options positions on the New York Mercantile and Intercontinental Exchanges for a third week in a row to their highest since October 2022, according to the U.S. Commodity Futures Trading Commission's Commitments of Traders report. Traders said the market's biggest uncertainty remains when Freeport LNG will restart its liquefied natural gas (LNG) export plant in Texas. After several delays from October to November and then to December, Freeport expects the facility to return in the second half of January, pending regulatory approvals. Analysts have long said Freeport would likely return during the first or second quarter of 2023 because the company still has work to do to satisfy federal regulators, including training staff in new procedures, before restarting the plant. Whenever Freeport returns, U.S. demand for gas will jump. The plant can turn about 2.1 billion cubic feet per day (bcfd) of gas into LNG, which is about 2% of U.S. daily production. Several vessels, including Prism Diversity, Prism Courage, Prism Agility and Elisa Larus, have been waiting in the Gulf of Mexico to pick up LNG from Freeport, some since early November. Other ships were sailing toward the plant, including Corcovado LNG, which is expected to arrive in mid-January, and Prism Brilliance, Kmarin Diamond and Wilforce expected in late January. U.S. GAS OUTPUT RISING Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 98.3 bcfd so far in January, up from 96.7 bcfd in December. That compares with a monthly record of 99.9 bcfd in November 2022. With the weather expected to remain warmer-than-normal through late January, Refinitiv projected average U.S. gas demand, including exports, would ease from 121.2 bcfd this week to 120.7 bcfd next week. The forecast for this week was lower than Refinitiv's outlook on Friday, while its forecast for next week was higher. The average amount of gas flowing to U.S. LNG export plants rose to 12.1 bcfd so far in January, up from 11.9 bcfd in December. That compares with a monthly record of 12.9 bcfd in March 2022. Week ended Week ended Year ago Five-year Jan 6 Dec 30 Jan 6 average (Forecast) (Actual) Jan 6 U.S. weekly natgas storage change (bcf): -31 -213 -183 -151 U.S. total natgas in storage (bcf): 2,860 2,891 3,016 2,948 U.S. total storage versus 5-year average -3.0% -6.7% Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five Year Last Year Average Average 2022 (2018-2022) Henry Hub 3.86 3.71 4.26 6.54 3.60 Title Transfer Facility (TTF) 22.24 21.12 28.25 40.50 14.39 Japan Korea Marker (JKM) 28.45 28.85 28.53 34.11 14.31 Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days Two-Week Total Forecast Current Day Prior Day Prior Year 10-Year 30-Year Norm Norm U.S. GFS HDDs 352 350 474 442 446 U.S. GFS CDDs 2 2 2 3 3 U.S. GFS TDDs 354 352 476 445 449 Refinitiv U.S. Weekly GFS Supply and Demand Forecasts Prior Week Current Week Next Week This Week Five-Year Last Year Average For Month U.S. Supply (bcfd) U.S. Lower 48 Dry Production 98.5 98.4 98.4 94.3 88.8 U.S. Imports from Canada 7.8 8.6 8.7 10.0 9.4 U.S. LNG Imports 0.0 0.0 0.0 0.1 0.4 Total U.S. Supply 106.3 106.9 107.2 104.4 98.6 U.S. Demand (bcfd) U.S. Exports to Canada 3.2 2.7 2.8 2.8 2.8 U.S. Exports to Mexico 4.9 5.1 5.0 5.8 5.3 U.S. LNG Exports 11.8 12.4 12.4 12.5 7.2 U.S. Commercial 12.6 14.7 14.7 18.1 17.1 U.S. Residential 20.0 23.8 24.0 30.3 29.8 U.S. Power Plant 27.3 30.2 29.4 29.2 28.5 U.S. Industrial 23.7 24.6 24.6 25.4 25.6 U.S. Plant Fuel 4.9 4.9 4.9 4.9 4.9 U.S. Pipe Distribution 2.4 2.7 2.7 2.7 2.4 U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1 Total U.S. Consumption 91.1 101.0 100.5 110.7 108.4 Total U.S. Demand 111.0 121.2 120.7 131.8 123.7 U.S. weekly power generation percent by fuel - EIA Week ended Week ended Week ended Week ended Week ended Jan 13 Jan 6 Dec 30 Dec 23 Dec 16 Wind 8 12 11 9 12 Solar 2 2 2 2 2 Hydro 7 7 6 6 6 Other 2 2 2 2 2 Petroleum 0 0 0 0 0 Natural Gas 40 36 35 37 37 Coal 19 18 23 24 20 Nuclear 22 23 19 19 20 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu) Hub Current Day Prior Day Henry Hub 3.43 3.78 Transco Z6 New York 3.49 3.23 PG&E Citygate 16.41 16.58 Dominion South 2.66 2.78 Chicago Citygate 3.26 3.40 Algonquin Citygate 4.56 4.43 SoCal Citygate 19.50 18.65 Waha Hub 1.73 1.76 AECO 2.91 3.03 SNL U.S. Power Next-Day Prices ($ per megawatt-hour) Hub Current Day Prior Day New England 46.50 45.75 PJM West 43.25 43.50 Ercot North 36.00 24.00 Mid C 157.33 55.50 Palo Verde 88.75 102.50 SP-5 149.25 155.00 (Reporting by Scott DiSavino; Editing by Andrea Ricci, Lisa Shumaker and Barbara Lewis)