US natural gas prices hold near 26-month high ahead of storage report

By Scott DiSavino

March 6 (Reuters) - U.S. natural gas futures held near a 26-month high on Thursday as the market waited for direction from a federal report expected to show last week's storage withdrawal was near normal for this time of year.

Gas prices spiked earlier this week on record flows to liquefied natural gas export (LNG) plants and worries Canada would reduce power and gas exports to the U.S. after U.S. President Donald Trump imposed tariffs on Canada and Mexico on March 4.

In 2024, Canada supplied about 8% of total U.S. gas demand, including exports, and about 1% of total U.S. power demand, again including exports. Some of those power and gas exports returned to Canada.

Front-month gas futures NGc1 for April delivery on the New York Mercantile Exchange were down 0.6 cents, or 0.1%, to $4.444 per million British thermal units (mmBtu) at 8:33 a.m. EST (1333 GMT). On Wednesday, the contract closed at its highest price since December 2022 for a second day in a row.

Prices are up about 14% so far this week despite near-record output and forecasts for mostly mild weather through mid-March, which should allow utilities to pull less gas out of storage over the next week or two.

Analysts projected utilities pulled 92 billion cubic feet (bcf) of gas out of storage during the week ended February 28. That compares with declines of 56 bcf during the same week last year and a five-year average draw of 94 bcf for this time of year. EIA/GAS NGAS/POLL

Extreme cold weather earlier this year forced energy firms to pull massive amounts of gas out of storage, including record amounts in January, leaving current stockpiles about 12% below the five-year (2020-2024) normal for this time of year.

SUPPLY AND DEMAND

Average gas output in the Lower 48 U.S. states has risen to 105.8 billion cubic feet per day (bcfd) so far in March, up from a record 105.1 bcfd in February, according to LSEG data.

On a daily basis, however, output was on track to decline by 2.4 bcfd over the past six days to a preliminary one-week low of 104.5 bcfd on Thursday, down from a three-week high of 106.9 bcfd on February 28. That compares with an all-time daily high of 107.2 on February 6.

In the import market, Canadian gas exports to the U.S. have dropped to an average of 8.2 bcfd over the past few days since Trump's tariffs were imposed, down from an average of 9.8 bcfd during the prior 11 days (February 21-March 3), according to LSEG data.

That compares with an average of 8.6 bcfd of Canadian gas exports to the U.S. in 2024 and 7.6 bcfd over the prior five years (2019-2023).

Meteorologists projected weather in the Lower 48 states would turn from mostly warmer than normal from March 6-15 to mostly colder than normal from March 16-21.

LSEG forecast average gas demand in the Lower 48, including exports, will fall from 119.2 bcfd this week to 111.0 bcfd next week. Those forecasts were similar to LSEG's outlook on Wednesday.

The amount of gas flowing to the eight big U.S. LNG export plants has risen to an average of 15.7 bcfd so far in March, up from a record 15.6 bcfd in February, as new units at Venture Global's VG.N 3.2-bcfd Plaquemines LNG export plant under construction in Louisiana enter service.