U.S. natgas futures jump 5% with output slow to return, profit taking

U.S. natgas futures jump 5% with output slow to return, profit taking

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U.S. natural gas futures jumped about 5% to a one-week high on Tuesday as short sellers took

profits for a second day after prices last week fell to a 25-month low and as output remains lower than last month

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following recent extreme cold that froze oil and gas wells in several producing basins.

Also supporting prices was a growing belief that Freeport LNG’s export plant in Texas would soon start pulling in

a lot more gas in coming weeks once it starts producing liquefied natural gas (LNG) for export.

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Freeport, however, was on track to receive no gas from pipelines on Tuesday after taking in small amounts over the

past 12 days, according to Refinitiv data.

Gas prices jumped higher despite forecasts for milder weather and lower heating demand over the next two weeks

than previously expected.

Meteorologists forecast the weather would remain mostly warmer than normal through Feb. 22 except for a few cold

days around the Feb. 18-19 weekend. Traders noted that cold on the weekend does not boost gas use as much as during

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the workweek because usage is lower on weekends when many businesses are shut.

Freeport told Texas state regulators last week that it would start sending gas to one of three liquefaction trains

at its long-closed export plant. The plant is waiting for permission from federal regulators to start loading LNG to

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free up space in its storage tanks. The liquefaction trains turn gas into LNG for export.

Many analysts have said they do not expect the plant to return to full power until mid March or later. A couple of

Freeport’s customers – Japan’s JERA and Osaka Gas – have said they do not expect to get LNG

from the plant until after March.

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 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

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interested parties an opportunity to voice their concerns about Freeport’s restart plans and get an update on what’s

happening at the plant.

Front-month gas futures for March delivery rose 12.7 cents, or 5.2%, to settle at $2.584 per million

British thermal units, their highest close since Jan. 31. Last week, the contract fell to its lowest close since

December 2020.

That price increase pushed the contract out of technically oversold territory for the first time in seven days.

The contract had been in oversold territory for 19 of the 25 trading days so far this year.

With interest in gas markets rising in recent weeks, open interest in the front-month jumped to nearly 302,000

contracts on Monday, its highest since August 2021 for a sixth day in a row.

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At the same time, the number of shares outstanding in the U.S. Natural Gas Fund, an exchange-traded fund

(ETF) designed to track daily gas price movements, rose by 14.4 million on Monday to a fresh record high of 117.5

million shares.

Refinitiv said average gas output in the U.S. Lower 48 states fell to 95.7 billion cubic feet per day (bcfd) so

far in February, down from 98.3 bcfd in January. That compares with a monthly record of 99.8 bcfd in November 2022.

With milder weather coming, Refinitiv forecast U.S. gas demand, including exports, would drop from 124.9 bcfd this

week to 119.8 bcfd next week. Those forecasts were lower than Refinitiv’s outlook on Monday.

Week ended Week ended Year ago Five-year

Feb 3 Jan 27 Feb 3 average

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(Forecast) (Actual) Feb 3

U.S. weekly natgas storage change (bcf): -185 -151 -228 -171

U.S. total natgas in storage (bcf): 2,398 2,583 2,133 2,249

U.S. total storage versus 5-year average 6.6% +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 2.47 2.46 4.46 6.54 3.60

Title Transfer Facility (TTF) 18.10 18.18 26.94 40.50 14.39

Japan Korea Marker (JKM) 18.50 18.53 25.82 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 349 354 405 406 402

U.S. GFS CDDs 4 4 4 6 5

U.S. GFS TDDs 353 358 409 412 407

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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 96.0 96.3 96.4 91.7 87.7

U.S. Imports from Canada 8.4 8.5 8.1 10.2 9.1

U.S. LNG Imports 0.0 0.1 0.0 0.2 0.2

Total U.S. Supply 104.3 104.9 104.5 102.1 97.0

U.S. Demand (bcfd)

U.S. Exports to Canada 2.2 2.6 2.5 2.2 2.7

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U.S. Exports to Mexico 5.1 5.1 5.3 6.0 5.2

U.S. LNG Exports 12.6 12.7 12.1 12.3 6.6

U.S. Commercial 18.4 16.0 14.2 19.4 16.4

U.S. Residential 31.5 26.3 23.1 33.3 27.7

U.S. Power Plant 33.5 30.0 30.6 29.6 28.1

U.S. Industrial 26.1 24.6 24.4 26.0 25.2

U.S. Plant Fuel 4.7 4.8 4.8 4.9 4.8

U.S. Pipe Distribution 3.1 2.8 2.7 2.9 3.1

U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1

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Total U.S. Consumption 117.5 104.6 99.9 116.2 105.4

Total U.S. Demand 137.4 124.9 119.8 136.7 119.9

U.S. weekly power generation percent by fuel – EIA

Week ended Week ended Week ended Week ended eek ended

Feb 10 Feb 3 Jan 27 Jan 20 Jan 13

Wind 15 10 11 13 11

Solar 3 2 2 2 2

Hydro 6 7 7 7 7

Other 2 2 2 2 2

Petroleum 1 0 0 0 0

Natural Gas 36 39 38 36 38

Coal 18 21 19 18 19

Nuclear 20 19 21 21 21

SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)

Hub Current Day Prior Day

Henry Hub 2.17 2.40

Transco Z6 New York 2.19 4.51

PG&E Citygate 4.77 4.93

Eastern Gas (old Dominion South) 1.90 2.12

Chicago Citygate 2.13 2.42

Algonquin Citygate 3.17 11.00

SoCal Citygate 4.42 4.15

Waha Hub 1.29 1.49

AECO 2.05 2.00

SNL U.S. Power Next-Day Prices ($ per megawatt-hour)

Hub Current Day Prior Day

New England 49.25 215.75

PJM West 27.25 59.75

Ercot North 14.00 17.50

Mid C 53.25 48.50

Palo Verde 44.00 42.10

SP-5 42.25 39.00

(Reporting by Scott DiSavino; editing by Jonathan Oatis)

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