U.S. natgas futures jump 5% on colder forecasts for late December

U.S. natural gas futures jumped 5% to a one-week high on Friday on forecasts for much colder weather and higher heating demand through late December than previously expected.

In the spot market, U.S. West Coast power and gas prices have more than doubled over the past couple of weeks - with gas hitting multi-year highs - as freezing weather and snow blankets parts of California and gas pipeline outages and constraints limit flows of the fuel from Texas.

That colder weather should force utilities to pull more gas from storage in coming weeks. Gas stockpiles were about 1.6% below the five-year (2017-2021) average for this time of year.

The increase in futures prices came despite Freeport LNG's announcement last week that it will delay the planned restart of its liquefied natural gas (LNG) export plant in Texas from mid-December to the end of the year. That delay should keep LNG exports below record levels hit in March and leave more gas in the United States for domestic use.

Some analysts do not expect Freeport to return until January, February or later because it will likely take federal pipeline safety regulators longer than Freeport expects to review and approve the plant's restart plan once the company submits it.

At least one LNG vessel, Prism Brilliance, gave up on Freeport after the company delayed the planned restart, according to ship tracking data from Refinitiv. The ship started heading for Jamaica earlier this week but turned back and is now on its way to Cheniere Energy Inc's LNG Sabine Pass LNG export plant in Louisiana.

Two other vessels - Prism Diversity and Prism Courage - however, have continued to wait in the Gulf of Mexico since at least early November to pick up LNG from Freeport.

The Freeport plant, which can turn about 2.1 billion cubic feet per day (bcfd) of gas into LNG, shut on June 8 due to an explosion caused by inadequate operating and testing procedures, human error and fatigue, according to a report by consultants hired to review the incident and suggest corrective actions.

Front-month gas futures NG1! for January delivery on the New York Mercantile Exchange rose 28.3 cents, or 4.7%, to settle at $6.245 per million British thermal units (mmBtu), their highest since Nov. 2.

That put the contract down about 1% this week after falling about 11% last week.

U.S. gas futures were up about 69% so far this year as much higher global prices feed demand for U.S. exports due to supply disruptions and sanctions linked to Russia's war in Ukraine.

Gas was trading at $42 per mmBtu at the Dutch Title Transfer Facility (TTF) in Europe (TRNLTTFMc1) and $33 at the Japan Korea Marker (JKM) in Asia (JKMc1).

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U.S. gas futures lag global prices because the United States is the world's top producer with all the fuel it needs for domestic use, while capacity constraints and the Freeport outage have prevented the country from exporting more LNG.

Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 99.7 bcfd so far in December, up from a monthly record of 99.5 bcfd in November.

With colder weather coming, Refinitiv projected average U.S. gas demand, including exports, would rise from 117.8 bcfd this week to 123.1 bcfd next week and 142.0 bcfd in two weeks. The forecasts for next week was higher than Refinitiv's outlook on Thursday.

The average amount of gas flowing to U.S. LNG export plants rose to 11.9 bcfd so far in December, up from 11.8 bcfd in November. That remains below the monthly record of 12.9 bcfd in March due to the Freeport outage.