U.S. natural gas edges up from 9-month low, but still down 24% for week

(Reuters) - U.S. natural gas futures edged up about 1% on Friday as forecasts for seasonally cold weather later this month helped prices bounce after they closed the prior session at a nine-month low.

The front-month remained on track for its second weekly plunge of around 24% in three weeks. Last week, prices rose about 8%.

Colder temperatures should boost heating demand in mid-February. For now, meteorologists expect the weather to remain warmer than normal.

Energy analysts noted output was rising as more wells return to service after a mid-January freeze. The amount of gas flowing to the nation's liquefied natural gas export plants will remain low so long as a unit at Freeport LNG's export plant in Texas remains shut.

Front-month gas futures <NGc1> for March delivery on the New York Mercantile Exchange (NYMEX) rose 1.9 cents, or 0.9%, to $2.069 per million British thermal units (mmBtu) at 9:40 a.m. EST (1440 GMT). On Thursday, the contract settled at its lowest since April 13, 2023.

It remained in technically oversold territory for a fourth day in a row.

In addition to massive declines in gas prices in recent weeks, another sign that the energy market was giving up on the winter of 2023-2024 was a drop in spot power prices at the PJM West hub <EL-PK-PJMW-SNL>, which covers an area from northwestern Pennsylvania to Washington, D.C. Next-day prices at PJM West fell to $19.25 per megawatt hour (MWh) for Friday, their lowest since December 2021.

Rising price volatility has increased interest in gas trading in recent weeks, boosting open interest in NYMEX futures to 1.48 million contracts on Jan. 31, the most since February 2020 for a second day in a row.

SUPPLY AND DEMAND

Financial company LSEG said gas output in the U.S. Lower 48 states rose to an average of 104.7 billion cubic feet per day (bcfd) so far in February from 102.0 bcfd in January. That was still below the monthly record high of 106.3 bcfd in December.

Meteorologists projected temperatures in the Lower 48 states would remain warmer than normal through at least Feb. 15 before turning near normal on Feb. 16-17.

LSEG forecast U.S. gas demand in the Lower 48, including exports, would slide from 126.6 bcfd this week to 125.1 bcfd next week and 124.5 bcfd in two weeks. The forecast for next week was lower than LSEG's outlook on Thursday.

Gas flows to the seven big U.S. LNG export plants rose to an average of 14.0 bcfd so far in February, up from 13.9 in January. That was still below the monthly record high of 14.7 bcfd in December.

Analysts said U.S. LNG feedgas would likely not revisit record levels until Freeport LNG returns to full power, which is expected to occur in mid- to late-February.

The U.S. became the world's biggest LNG supplier in 2023, ahead of recent leaders Australia and Qatar, as much higher global prices fed demand for more exports due in part to supply disruptions and sanctions linked to Russia's war in Ukraine.

Gas was trading around $9 per mmBtu at both the Dutch Title Transfer Facility (TTF) benchmark in Europe <TRNLTTFMc1> and the Japan Korea Marker (JKM) benchmark in Asia <JKMc1>. [NG/EU]

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