UPDATE 3-US natgas prices jump 4% to two-year high on forecasts for more cold, record demand

Adds details

By Scott DiSavino

Jan 16 (Reuters) - U.S. natural gas futures jumped about 4% to a two-year high on Thursday on colder weather forecasts for the Martin Luther King Jr. Day holiday weekend, which could cut output by freezing gas wells and pipes while demand for the fuel to heat homes and businesses rises to a record high.

Front-month gas futures NGc1 for February delivery on the New York Mercantile Exchange rose 17.5 cents, or 4.3%, to settle at $4.258 per million British thermal units, the highest close since Dec. 30, 2022.

The U.S. Energy Information Administration (EIA) said utilities pulled 258 billion cubic feet (bcf) of gas out of storage during the week ended Jan. 10, in line with the 255-bcf withdrawal analysts forecast in a Reuters poll.

The draw far exceeded the decrease of 150 bcf a year earlier and a five-year average draw of 128 bcf for this time of year. EIA/GAS NGAS/POLL Analysts cited cold weather that fed heating demand.

Analysts projected the next two storage reports for the weeks ending Jan. 17 and Jan. 24 would also show utilities pulling more than 200 bcf of gas from inventories to meet soaring heating demand. Some analysts said withdrawals this month could top the current record high of 994 bcf set in January 2022, according to federal energy data.

There was currently about 3% more gas in storage than usual for the time of year. Storage withdrawals this month could remove that surplus by the end of January, which would be the first time stockpiles would fall below the five-year average since January 2022. EIA/GAS NGAS/POLL

In the spot market, extreme cold blanketing much of the country boosted next-day gas prices to a one-year high at the U.S. Henry Hub benchmark NG-W-HH-SNL in Louisiana.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 U.S. states fell from 104.2 billion cubic feet per day (bcfd) in December to 103.3 billion so far in January due mostly to freezing oil and gas wells and pipes, known as freeze-offs. That compares with a monthly record of 104.5 bcfd in December 2023.

While curtailments were small so far this month, analysts and traders warned that freeze-offs could soar in coming days, with the coldest weather still to come.

Freeze-offs in past winters cut gas output by roughly 8.1 bcfd from Jan. 9-16 in 2024, 4.6 bcfd from Jan. 31-Feb. 1 in 2023, 15.8 bcfd from Dec. 20-24 in 2022, and 20.4 bcfd from Feb. 8-17 in 2021, according to LSEG data.

Meteorologists projected that weather in the Lower 48 states would remain mostly colder than normal through Jan. 25, with the coldest days expected around Jan. 20-21, before turning mostly near normal from Jan. 26-31.

The weather on Jan. 20-21 at the end of the long holiday weekend was on track to be colder than the same period in 2024 when gas demand hit a daily record high and spot prices jumped to multi-year highs at several trading hubs across the country. Some weather forecasters projected that Jan. 20-21 could be the coldest days in a decade or more.

LSEG forecast that average gas demand in the Lower 48, including exports, would rise from 145.3 bcfd this week to 153.8 bcfd next week. Those forecasts were higher than LSEG's outlook on Wednesday.

On a daily basis, LSEG said total gas use so far this winter peaked at 158.9 bcfd on Jan. 8 and could reach 170.3 bcfd on Jan. 20 and 171.2 bcfd on Jan. 21. If correct, demand on Jan. 20-21 would top the current daily record high of 168.4 bcfd on Jan. 16, 2024.

Adding to total gas demand, the amount of gas flowing to the eight big U.S. LNG export plants rose to an average of 15.1 bcfd so far in January from 14.4 bcfd in December. That compares with a monthly record high of 14.7 bcfd in December 2023.

On Thursday, LNG feedgas was on track to reach 15.8 bcfd, up from the current daily all-time high of 15.5 bcfd on Jan. 11, with flows to Cheniere Energy's LNG.N 4.6-bcfd Sabine Pass in Louisiana set to hit a record 5.3 bcfd and flows to Venture Global LNG's 2.6-bcfd Plaquemines export plant under construction in Louisiana set to hit a record of 1.2 bcfd.

(Reporting by Scott DiSavino; Editing by Mark Porter, David Gregorio and Leslie Adler)

((scott.disavino@thomsonreuters.com; +1 332 219 1922; Reuters Messaging: scott.disavino.thomsonreuters.com@reuters.net))

For gas data on the LSEG terminal type ENERGY in the search bar and then go to the GAS drop down and the NORTH AMERICA drop down.

For Interactive Map, type 'Interactive Map' in the box at upper left of the LSEG terminal

For graphics on Baker Hughes rig counts, see: http://graphics.thomsonreuters.com/15/rigcount/index.html

For next-day SNL U.S. gas prices, see: 0#SNL-NG

For next-day SNL U.S. power prices, see: 0#SNL-PWR

For U.S. natgas price and storage polls, see: NGAS/POLL

For U.S. nuclear power outages, see: NUKE/

For U.S. Northwest hydro power report, see: NWRFC

For U.S./Canada natural gas rig count vs Henry Hub futures price, see: http://tmsnrt.rs/2eT9k44

For the U.S. natural gas speed guide, see: USGAS

For the U.S. power speed guide, see: USPOWER

To determine CFTC managed money net position add (NYMEX Henry Hub options and futures combined 3023651MNET) plus (ICE Henry Hub options and futures combined 3023391MNET divided by four) plus (NYMEX Henry Hub swaps options and futures combined 303565BMNET divided by four) plus (NYMEX Henry Hub penultimate gas swaps 303565CMNET divided by four)

NYMEX Henry Hub options and futures combined 0#3CFTC023651

NYMEX Henry Hub futures only 0#1CFTC023651

ICE Henry Hub options and futures combined 0#3CFTC023391

NYMEX Henry Hub swaps options and futures combined 0#3CFTC03565B

NYMEX Henry Hub Penultimate gas swaps 0#3CFTC03565C