US natgas prices fall 4% to 8-week low on forecasts for milder weather, lower heating demand

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By Scott DiSavino

Jan 30 (Reuters) - U.S. natural gas futures fell about 4% to an eight-week low on Thursday on forecasts for milder weather and lower heating demand next week than previously expected.

That decline came despite forecasts for cooler weather in mid-February that should boost heating demand later next month, and a bigger-than-expected storage withdrawal during extreme cold last week.

The U.S. Energy Information Administration (EIA) said utilities pulled 321 billion cubic feet (bcf) of gas out of storage during the week ended Jan. 24.

That was bigger than the 314-bcf withdrawal analysts forecast in a Reuters poll and compares with a drop of 234 bcf during the same week last year and a five-year average draw of 189 bcf for this time of year. EIA/GAS NGAS/POLL

That was also only the fourth time utilities pulled over 300 bcf of gas out of storage in a week, but fell short of the record 359 bcf withdrawn during a freezing week in January 2018.

Analysts noted last week's decline erased the small surplus of gas in storage over the five-year average for the first time since January 2022, and could boost total withdrawals for the month to a record high. The current record monthly storage withdrawal is 994 bcf in January 2022, according to federal energy data.

On its first day as the front-month, gas futures NGc1 for March delivery on the New York Mercantile Exchange fell 12.3 cents, or 3.9%, from where that contract closed on Wednesday to settle at $3.047 per million British thermal units (mmBtu).

That was the lowest close since Dec. 4 because the new March front-month was down about 14% from where the higher-priced February contract expired on Wednesday when it was still the front-month.

That 14% drop would be the biggest daily percentage decline since the front-month fell about 17% in January 2024 when the front-month last switched from February to March.

The price drop also pushed the contract into technically oversold territory for the first time since October and boosted historic or actual 30-day close-to-close futures volatility to 100.2%, the most since March 2023.

Historic daily volatility hit a record high of 177.7% in February 2022 and a record low of 7.3% in June 1991. Historic volatility has averaged 87.3% so far this year, versus 73.7% in 2024 and a five-year (2019-2023) average of 64.3%.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 U.S. states fell from 103.8 billion cubic feet per day (bcfd) in December to 102.3 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 104.6 bcfd in December 2023.

Meteorologists projected weather in the Lower 48 states would remain mostly warmer than normal through Feb. 7, before turning mostly near normal from Feb. 8-14.

With mild weather coming, LSEG forecasts average gas demand in the Lower 48 states, including exports, would fall from 136.8 bcfd this week to 124.7 bcfd next week. The forecast for next week was lower than LSEG's outlook on Wednesday.

The amount of gas flowing to the eight big U.S. liquefied natural gas (LNG) export plants rose to an average of 14.6 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.

On a daily basis, LNG feedgas was on track to rise to 14.8 bcfd on Thursday from 14.5 bcfd on Wednesday and 14.0 bcfd on Tuesday.

Most of that LNG feedgas increase came from rising flows to Freeport LNG's 2.1-bcfd export plant in Texas as the third of three liquefaction trains at the plant returned to service following a shutdown on Jan. 28-29, according to a company report to Texas environmental regulators and LSEG data.

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

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