US natgas prices climb 2% on rising flows to LNG export plants

U.S. natural gas futures climbed about 2% on Wednesday on rising flows to the nation's liquefied natural gas export plants and expectations utilities pulled more gas out of storage than usual for a second week in a row last week.

Analysts, however, projected rising output and forecasts for mild weather and low heating demand through the start of the new year should keep storage withdrawals smaller than normal in coming weeks. There was currently about 4% more gas in storage than usual for this time of year.

Front-month gas futures NG1! for January delivery on the New York Mercantile Exchange rose 6.6 cents, or 2.0%, to settle at $3.374 per million British thermal units (mmBtu).

Some analysts have said that winter, and the high prices it usually brings, could be over before the season officially starts since the heavily traded March-April "widow-maker" spread started trading in unusual contango in early December. 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 have already hit their 2024 peak when they reached an intraday high of $3.56 per mmBtu in November. 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 rose to 103.1 billion cubic feet per day 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 would remain mostly warmer than normal through at least Jan. 2.

But with seasonally colder weather coming - it is usually colder in January than December - LSEG forecast average gas demand in the Lower 48, including exports, would rise from 123.9 bcfd this week to 128.2 bcfd next week. The forecast for next week was lower than LSEG's outlook on Tuesday.

The amount of gas flowing to the eight big LNG export plants operating in the U.S. rose 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.

Some of that LNG feedgas increase came from rising flows to the first 1.8-bcfd phase of Venture Global LNG's Plaquemines export plant under construction in Louisiana. Plaquemines was on track to pull in about 0.3 bcfd of gas on Wednesday, according to LSEG data, the same as Tuesday and up from an average of 0.1 bcfd over the prior seven days.

The U.S. became the world's biggest LNG supplier in 2023, ahead of recent leaders Australia and Qatar, as much higher global prices feed demand for more exports due in part to supply disruptions and sanctions linked to Russia's invasion of Ukraine in February 2022.

Gas prices were trading around $12 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe (TRNLTTFMc1) and $13 at the Japan-Korea Marker (JKM) (JKMc1) benchmark in Asia.