US gas exchange prices fall to 19-month low

US natural gas futures dropped about 6% to a 19-month low on January 25 on forecasts for less cold weather and lower heating demand next week than previously expected and a growing belief in the market that Freeport LNG’s liquefied natural gas (LNG) export plant in Texas will not actually restart for weeks or months, Report informs referring to Reuters.

"With a less severe (weather) outlook across Texas and MidCon (Midcontinent region), narrowing odds for disruptive freeze-offs soften the February outlook," analysts at EBW Analytics, a consultancy, told customers in a note, referring to the freezing of oil and gas wells - freeze-offs - that reduce output.

Earlier this week, Freeport said its export plant was ready to begin the process of exiting a seven-month outage, pending regulatory approval. But some analysts have stuck with their earlier estimates that it will take until February, March or even later for the plant to actually start pulling in big amounts of pipeline gas.

Freeport, the second-biggest US LNG exporter, is important because the market expects gas prices and demand to rise once the plant restarts. The facility, which was shut by a fire on June 8, 2022, can pull in about 2.1 billion cubic feet per day (bcfd) of gas and turn it into LNG when operating at full power.

That is about 2% of what US gas producers pull out of the ground each day.

Front-month gas futures for February delivery fell 19.1 cents, or 5.9%, to settle at $3.067 per million British thermal units (mmBtu), their lowest close since June 3, 2021.

That price drop pushed the front-month back into technically oversold territory with a relative strength index (RSI) below 30 for the first time in three days.

Analysts have said that March, the last month of winter when demand for heating fuel is high, should never trade below April, the first month of spring when demand is lower.

Even though the forecasts call for less cold weather over the next two weeks than previously expected, temperatures are still expected to be lower next week than this week.

With colder weather coming, Refinitiv forecast US gas demand, including exports, would jump from 130.9 bcfd this week to 138.7 bcfd next week. The forecast for this week was higher than Refinitiv’s outlook on January 24, while the forecast for next week was lower.