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U.S. natgas jumps 6% on higher demand, despite surprise storage build

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U.S. natural gas futures rose about 6% on Thursday on forecasts for higher demand

this week than previously expected, colder-than-normal weather coming in late January and uncertainty about

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when the Freeport liquefied natural gas (LNG) export plant in Texas will exit a seven-month outage.

That price increase came despite a federal report showing a surprise build in gas stockpiles that was the

first injection during the month of January on record because the weather last week was warmer than normal,

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keeping heating demand low.

The U.S. Energy Information Administration (EIA) said utilities added 11 billion cubic feet (bcf) of gas

into storage during the week ended Jan. 6.

That was a surprise from the 13-bcf withdrawal forecast by analysts in a Reuters poll and compares with a

decrease of 157 bcf in the same week last year and a five-year (2017-2021) average decline of 157 bcf.

Last week’s increase boosted stockpiles to 2.902 trillion cubic feet (tcf), or 1.4% below the five-year

average of 2.942 tcf for this time of year.

Front-month gas futures for February delivery rose 20.2 cents, or 5.5%, to $3.873 per million

British thermal units (mmBtu) at 10:56 a.m. EST (1556 GMT). Earlier in the week, the contract closed at its

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lowest level since Dec. 30, 2021.

That continues last year’s record volatility, with the contract now up or down more than 5% on five of the

eight trading days in 2023.

That gain pushed the contract out of oversold territory and puts it on track to rise for a second day in a

row for the first time since late December.

Daily volume in the U.S. Natural Gas Fund, an exchange-traded fund (ETF) designed to track the daily

price movement of gas, rose to 21.1 million shares on Wednesday, its highest since February 2022, according to

Refinitiv data.

That was the fifth most active day for the U.S. gas fund and follows a rise on Monday in shares outstanding

to their highest since December 2020. Daily share purchases have entered the top 10 daily inflows three times

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already this year.

Traders said the biggest market uncertainty remains the restart date for Freeport LNG’s export plant in

Texas.

After several delays from October to November and then to December, Freeport now expects the facility to be

back in operation in the second half of January, pending regulatory approvals.

Analysts, however, have long said Freeport, which shut in a fire on June 8, would probably return to

service during the first or second quarter of 2023 because further work is required to satisfy federal

regulators, including training staff in new safety procedures, before the plant can be restarted.

A growing number of analysts and other sources have said this week that they do not expect Freeport back

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until February or later.

Whenever Freeport returns, U.S. gas demand 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 and Prism Agility, were waiting in the Gulf of

Mexico to pick up LNG from Freeport. Some have been there since early November.

U.S. GAS OUTPUT RISING

Data provider Refinitiv said that average gas output in the U.S. Lower 48 states has risen to 98.4 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 until late January, Refinitiv projected average U.S.

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gas demand, including exports, would ease from 121.2 bcfd this week to 119.4 bcfd next week. The forecast for

this week was higher than Refinitiv’s outlook on Wednesday.

Week ended Week ended Year ago Five-year

Jan 6 Dec 30 Jan 6 average

(Actual) (Actual) Jan 6

U.S. weekly natgas storage change (bcf): +11 -213 -157 -157

U.S. total natgas in storage (bcf): 2,902 2,891 3,042 2,942

U.S. total storage versus 5-year average -1.4% -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 3.77 3.67 4.26 6.54 3.60

Title Transfer Facility (TTF) 21.36 20.74 28.25 40.50 14.39

Japan Korea Marker (JKM) 26.87 27.06 28.53 34.11 14.31

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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 383 369 474 442 446

U.S. GFS CDDs 2 2 2 3 3

U.S. GFS TDDs 385 372 476 445 449

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 98.6 98.7 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 106.3 107.1 107.4 104.4 98.6

U.S. Demand (bcfd)

U.S. Exports to Canada 3.2 2.7 2.7 2.8 2.8

U.S. Exports to Mexico 4.9 5.3 5.1 5.8 5.3

U.S. LNG Exports 11.8 12.3 12.0 12.5 7.2

U.S. Commercial 12.6 14.7 14.5 18.1 17.1

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U.S. Residential 20.0 23.6 23.7 30.3 29.8

U.S. Power Plant 27.3 30.3 29.3 29.2 28.5

U.S. Industrial 23.7 24.6 24.5 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 2.6 2.7 2.4

U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1

Total U.S. Consumption 91.1 100.9 99.6 110.7 108.4

Total U.S. Demand 111.0 121.2 119.4 131.8 123.7

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 10 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 38 36 35 37 37

Coal 19 18 23 24 20

Nuclear 21 23 19 19 20

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

Hub Current Day Prior Day

Henry Hub 3.32

Transco Z6 New York 3.30

PG&E Citygate 18.80

Dominion South 2.60

Chicago Citygate 3.11

Algonquin Citygate 6.49

SoCal Citygate 21.00

Waha Hub 2.40

AECO 2.90

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

Hub Current Day Prior Day

New England 58.00 73.50

PJM West 38.00 49.50

Ercot North 27.50 23.00

Mid C 130.33 165.50

Palo Verde 137.25 152.25

SP-5 143.00 161.25

(Reporting by Scott DiSavino

Editing by Mark Potter and Bernadette Baum)

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