(Reuters) – U.S. natural gas futures soared 9% in volatile trade on Monday as winter storms battered the eastern half of the country, causing output to decline as some oil and gas wells and pipes start to freeze. So far, those storms have knocked out power to more than 366,000 homes and businesses from Missouri to Virginia.
Energy traders also noted that gas prices were gaining support from near-record gas flows to U.S. liquefied natural gas (LNG) export plants and forecasts for colder weather and higher heating demand over the next two weeks than previously expected.
Front-month gas futures for February delivery on the New York Mercantile Exchange were up 31.4 cents, or 9.4%, to $3.668 per million British thermal units (mmBtu) at 9:20 a.m. EST (1420 GMT). On Friday, the contract dropped by about 8% to close at its lowest price since Dec. 17.
With big price swings in recent weeks, Monday’s gain was only the biggest daily percentage increase since prices jumped by 12.0% on Dec. 30.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states has risen to 105.0 billion cubic feet per day (bcfd) so far in January, up from 103.8 bcfd in December. That compares with a record 105.3 bcfd in December 2023.
But since output hit a 10-month high of 106.0 bcfd on Dec. 30, supplies were on track to drop by around 3.4 bcfd to a preliminary six-week low of 102.6 bcfd on Monday due mostly to freezing wells and pipes, known in the energy industry as freeze-offs.
Those output declines from freeze-offs so far this winter were much smaller than in recent years. But with the coldest weather still to come, analysts have said that output declines from freeze-offs should grow in the coming days.
In past winters, freeze-offs slashed gas output by around 16.5 bcfd from Jan. 8-16 in 2024, 19.4 bcfd from Dec. 21-24 in 2022 and 20.4 bcfd from Feb. 8-17 in 2021, according to LSEG data.
Meteorologists projected weather in the Lower 48 states would remain mostly colder than normal through Jan. 21 with the coldest days expected later this week.
LSEG forecast average gas demand in the Lower 48, including exports, would ease from 147.0 bcfd this week to 146.7 bcfd next week. Those forecasts were higher than LSEG’s outlook on Friday.
On a daily basis, LSEG projected total gas use could reach 155.5 bcfd on Jan. 7, falling well short of the daily record of 168.4 bcfd on Jan. 16, 2024 during another brutal winter freeze.
The amount of gas flowing to the eight big U.S. LNG export plants has risen to an average of 15.1 bcfd so far in January, up from 14.4 bcfd in December. That compares with a monthly record high of 14.7 bcfd in December 2023. 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 was trading around $15 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe and $14 at the Japan Korea Marker (JKM) benchmark in Asia.
Reporting by Scott DiSavino; Editing by Paul Simao
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