US natural prices drop 5% from 13-month high on rising output, mild weather forecasts

U.S. natural gas futures dropped about 5% on Friday from the 13-month high reached in the prior session on forecasts for mostly mild weather through late December and rising supplies as producers keep pulling more gas out of the ground.

The price decline happened even as the amount of gas flowing to U.S. LNG export plants was on track to reach an 11-month high, as Venture Global LNG's Plaquemines plant, which is under construction in Louisiana, likely started pulling in enough fuel to produce first LNG.

Front-month gas futures NG1! for January delivery on the New York Mercantile Exchange fell 17.5 cents, or 5.1%, to settle at $3.280 per million British thermal units (mmBtu). On Thursday, the contract closed at its highest level since November 2023.

For the week, the front-month was up about 7% after falling about 9% last week.

Despite this week's price increase, some analysts have said that winter, and the high prices it usually brings, could be over before the season officially starts now that the heavily traded March-April "widow maker" spread is trading in unusual contango. That means the April contract is priced higher than the March contract.

March is the last month of the winter storage withdrawal season, and April is the first month of the summer storage injection season. Because gas is primarily a winter heating fuel, summer prices typically do not trade above winter ones.

It is also possible that gas prices hit their 2024 peak in November when they reached an intraday high of $3.56 per mmBtu. Over the past five years, prices hit their yearly highs in January 2023, August 2022, October 2021 and 2020, and January 2019.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 U.S. states has risen to 102.9 billion cubic feet per day (bcfd) so far in December, up from 101.5 bcfd in November. That compares with a record 105.3 bcfd in December 2023.

Meteorologists projected weather in the Lower 48 states would remain mostly warmer than normal through Dec. 28, except for a few colder-than-normal days from Dec. 21-23.

LSEG forecast average gas demand in the Lower 48, including exports, would drop from 129.4 bcfd this week to 125.0 bcfd next week before rising to 136.4 bcfd in two weeks. The forecasts for this week and next were higher than LSEG's outlook on Thursday.

The amount of gas flowing to the eight big LNG export plants operating in the U.S. has risen to an average of 14.1 bcfd so far in December, up from 13.6 bcfd in November. That compares with a monthly record high of 14.7 bcfd in December 2023.

On a daily basis, LNG feedgas was on track to rise to an 11-month high of 14.9 bcfd on Friday, up from 13.6 bcfd on Thursday, with flows to Cheniere Energy's LNG 4.5-bcfd Sabine in Louisiana rising to a 13-month high and the first 1.8-bcfd phase of the Plaquemines facility likely receiving enough gas for the plant to produce its first LNG.

LNG feedgas on Thursday was reduced when a liquefaction train at Freeport LNG's 2.1-bcfd export plant in Texas tripped off line due to an issue with the compressor system, according to a company filing with state environmental regulators. The Freeport train has likely returned to service since flows to the plant were on track to reach a one-month high of 2.3 bcfd on Friday, according to LSEG data.

text_section_type="notes">For gas data on the LSEG terminal type ENERGY in the search bar and then go to the GAS drop down and the NORTH AMERICA drop down.

For Interactive Map, type 'Interactive Map' in the box at upper left of the LSEG terminal

For graphics on Baker Hughes rig counts, see: http://graphics.thomsonreuters.com/15/rigcount/index.html

For next-day SNL U.S. gas prices, see: (0#SNL-NG)

For next-day SNL U.S. power prices, see: (0#SNL-PWR)

For U.S. natgas price and storage polls, see:

For U.S. nuclear power outages, see:

For U.S. Northwest hydro power report, see:

For U.S./Canada natural gas rig count vs Henry Hub futures price, see: http://tmsnrt.rs/2eT9k44

For the U.S. natural gas speed guide, see: (USGAS)

For the U.S. power speed guide, see: (USPOWER)

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