HomeNewsU.S. natural gas futures rose more than 2% on forecasts for colder weather

U.S. natural gas futures rose more than 2% on forecasts for colder weather

2/22/2023

U.S. natural gas futures rose more than 2% on Wednesday on forecasts for colder weather than previously expected and as investors covered short positions following steep declines. Front-month gas futures for March delivery on the New York Mercantile Exchange (NYMEX) were up 4.4 cents, or 2.1%, to $2.12 per million British thermal units (mmBtu) by 09:55 a.m. EST (1455 GMT).

Prices briefly dipped below the $2 per mmBtU level for the first time since September 2020 in overnight trading. U.S. natgas prices have fallen nearly 80% since scaling above $10 last August. "Speculators have been the best sellers. There's only one way for speculators to take a profit on a short position, and that's they got to buy it back," said Thomas Saal, senior vice president for energy at StoneX Financial Inc.

Supply is adequate, it's just that the demand has been poor because of the warm weather that has bought down natural gas prices to the levels that haven't been seen in a few years, Saal added. Data provider Refinitiv estimated 347 heating degree days (HDDs) over the next two weeks in the lower 48 U.S. states, up from a forecast of 341 HDDs on Tuesday. The normal for this time of year is 350 HDDs. HDDs estimate demand to heat homes and businesses by measuring the number of degrees a day's average temperature is below 65 degrees Fahrenheit (18 degrees Celsius).

On the supply side, Refinitiv said average gas output in the U.S. Lower 48 states was at 97.4 billion cubic feet per day (bcfd) so far in February, down from 98.3 bcfd in January after extreme cold froze oil and gas wells in several producing basins earlier in February. That compared with a monthly record of 99.8 bcfd in November 2022.

Refinitiv forecast U.S. gas demand, including exports, would rise from 119.4 bcfd this week to 120.6 bcfd next week. "Even with a demand uptick, growth in gas supply may likely present an oversupply scenario as early as 2Q 2023," said Ade Allen, Rystad Energy's New York-based gas markets analyst. "Our short-term outlook continues to signal a bearish sentiment, despite the restart of Freeport LNG."

On Tuesday, federal regulators approved the partial restart of Freeport LNG's export plant in Texas, including two liquefaction trains, two tanks, and one loop and dock each. The second-biggest U.S. LNG export plant was on track to pull in about 0.5 bcfd of gas from pipelines for the tenth day in a row on Wednesday, according to Refinitiv. Freeport LNG, when operating at full power, can turn about 2.1 bcfd of gas into LNG for export. Energy regulators and analysts, however, have said they do not expect Freeport LNG to return to full commercial operation until mid-March or later.

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