US natural gas futures jump 5% on LNG export boost

By Scott DiSavino

NEW YORK, Feb 4 (Reuters) - U.S. natural gas futures jumped about 5% on Wednesday on increases in gas flows to liquefied natural gas export plants and forecasts for more demand this week than previously expected.

That price increase came despite forecasts for the weather to turn warmer than normal through mid-February, and for lower demand next week than previously expected.

Gas futures for March delivery NGc1 on the New York Mercantile Exchange rose 15.4 cents, or 4.7%, to settle at $3.465 per million British thermal units (mmBtu).

Gas futures soared 140% between January 20 and 28 as extreme cold boosted heating demand to near-record highs and cut output to a two-year low by freezing oil and gas wells. They then dropped 57% from January 29 to February 2 as warmer weather thawed wells and boosted output.

Those massive price changes boosted historic or actual 30-day close-to-close futures volatility to a record high for a fifth day in a row, reaching 258.5% on Wednesday.

That volatility boosted total trading volume NG-TOT in futures to a record 1.9 million contracts on Monday, which blew past the prior all-time high of 1.6 million contracts set in November 2018.

Higher market volatility increases traders' opportunities to profit in a shorter amount of time, but also carries greater risks.

In the cash market, next-day gas prices at the Southern California Border NG-SCL-CGT-SNL fell to $1.76 per mmBtu, their lowest since November 2024. It is rare for gas prices to hit lows during the winter heating season.

But there was not much heating use in Los Angeles, the second-biggest city in the U.S., where temperatures were expected to reach 90 degrees Fahrenheit (32.2 Celsius) on Wednesday, according to weather forecaster AccuWeather.com. That compares with an average high of 68 F at this time of year and a record high for this day of 91 F in 1995.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 states edged up to 106.4 billion cubic feet per day (bcfd) so far in February, up from 106.3 bcfd in January. That compares with a monthly record high of 109.7 bcfd in December.

After extreme cold last week, meteorologists projected weather across the country would turn mostly warmer than normal through February 19. Temperatures in the U.S. Northeast, however, were still expected to remain below normal for another week.

LSEG projected average gas demand in the Lower 48 states, including exports, would fall from 160.0 bcfd this week to 140.9 bcfd next week. The forecast for this week was higher than LSEG's outlook on Tuesday, while its forecast for next week was lower.

Analysts projected energy firms likely pulled so much gas out of storage to meet near-record demand during the Arctic blast last week that stockpiles would go from around 5% above normal for this time of year during the week ended January 23 to about 1% below normal during the week ended January 30. EIA/GAS NGAS/POLL

Average gas flows to the eight large U.S. LNG export plants rose to 18.3 bcfd so far in February, up from 17.8 bcfd in January. That compares with a monthly record high of 18.5 bcfd in December.

The U.S. became the world's biggest LNG exporter in 2023, surpassing Australia and Qatar, as surging global prices fed demand for more low-cost U.S. gas, due in part to supply disruptions and sanctions linked to Russia's 2022 invasion of Ukraine.

Gas was trading at around $11 per mmBtu at both the Dutch Title Transfer Facility (TTF) TRNLTTFMc1 benchmark in Europe and the Japan-Korea Marker (JKM) JKMc1 benchmark in Asia. NG/EU