US natgas prices jump 6% to 23-month high on lower output, rising LNG feedgas

U.S. natural gas futures jumped about 6% to a 23-month high on Thursday on lower output in recent days, an increase in the amount of gas flowing to liquefied natural gas (LNG) export plants to an 11-month high, and early forecasts for more cold weather in January.

Front-month gas futures NG1! for January delivery on the New York Mercantile Exchange rose 21.0 cents, or 6.2%, to settle at $3.584 per million British thermal units, their highest since January 2023.

That price increase also came ahead of a report from the U.S. Energy Information Administration (EIA) that showed utilities pulled a bigger-than-usual 125 billion cubic feet (bcf) of gas out of storage during the week ended Dec. 13.

That was in line with the 126-bcf withdrawal analysts forecast in a Reuters poll and compares with a decrease of 92 bcf during the same week last year and a five-year average draw of 78 bcf for this time of year.

"The big draw did chop away at the storage surplus ... Gas is now closer to switching from a storage surplus to a storage deficit than at any point since the start of injection season," Bob Yawger, director of energy futures at Mizuho, said in a report.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 U.S. states rose to 103.0 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.

On a daily basis, however, output was on track to drop by 2.2 bcfd over the past six days to a preliminary four-week low of 101.9 bcfd on Thursday. Analysts noted that preliminary data was often revised later in the day.

Meteorologists projected weather in the Lower 48 would remain mostly warmer than normal through at least Jan. 3.

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 124.6 bcfd this week to 127.7 bcfd next week. The forecast for this week was higher than LSEG's outlook on Wednesday, while its forecast for next week was lower.

The amount of gas flowing to the eight big LNG export plants 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.

On a daily basis, LNG feedgas was on track to reach an 11-month high of 14.9 bcfd with flows rising to a seven-month high of 5.1 bcfd at Cheniere Energy's LNG 4.5-bcfd Sabine Pass in Louisiana and a record 0.4 bcfd at Venture Global LNG's 2.6-bcfd Plaquemines under construction in Louisiana.

In other LNG news, the Seapeak Catalunya <C}KL7309482782> LNG vessel anchored outside Boston with what will likely be New England's first LNG cargo of the winter - this one from Trinidad and Tobago. Last winter, Constellation Energy's CEG Everett LNG terminal in Massachusetts received six cargoes from December 2023-March 2024 - five from Trinidad and one from Norway, according to LSEG data.

New England power generators often switch from relatively cheap pipeline gas to more expensive oil and gas from LNG imports because gas pipelines into the six-state region cannot carry enough supply to heat the region's homes and businesses and fuel its power plants on the coldest winter days.