UPDATE 1-US natgas prices plunge 7% from 2-year high on milder late Jan weather forecasts

Adds closing prices

By Scott DiSavino

Jan 17 (Reuters) - U.S. natural gas futures plunged about 7% on Friday from a two-year high in the prior session on forecasts for milder weather in late January and early February that should cut demand for gas for heating.

This weekend, extreme cold weather over the Martin Luther King Jr. holiday weekend was on track to cut output by freezing gas wells and pipes and boost usage of the fuel to heat homes and businesses to record highs.

Front-month gas futures NGc1 for February delivery on the New York Mercantile Exchange fell 31.0 cents, or 7.3%, to settle at $3.948 per million British thermal units. On Thursday, the contract closed at its highest since Dec. 30, 2022.

For the week, the front-month eased about 1% after soaring about 19% last week.

After utilities pulled a massive 258 billion cubic feet (bcf) of gas out of storage during the week ended Jan. 10, analysts projected energy firms would keep pulling over 200 bcf of gas during the weeks ending Jan. 17 and Jan. 24 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 erase 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

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 103.4 bcfd 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. 26, with the coldest days expected around Jan. 20-21, before turning mostly near normal from Jan. 27-Feb. 1.

The weather on Jan. 20-21 at the end of the long holiday weekend was on track to be the coldest since last year's Martin Luther King Jr. holiday weekend, when gas demand hit a daily record high and spot prices jumped to multi-year highs at several trading hubs across the country. Some forecasters projected that Jan. 20-21 could be even more frigid this year, possibly the coldest in a decade or more.

With colder weather coming, LSEG forecast average gas demand in the Lower 48 states, including exports, would rise from 145.6 bcfd this week to 153.1 bcfd next week before dropping to 141.3 bcfd in two weeks as the weather turns mild. The forecast for next week was lower than LSEG's outlook on Thursday.

On a daily basis, LSEG said total gas use so far this winter peaked at 158.9 bcfd on Jan. 8 and could reach 167.2 bcfd on Jan. 20 and 169.3 bcfd on Jan. 21. If correct, demand on Jan. 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 Friday, LNG feedgas was on track to reach 15.8 bcfd, up from an all-time high of 15.6 bcfd on Thursday, with 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 Emelia Sithole-Matarise and David Gregorio)

((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