U.S. natgas falls 3% on smaller than expected storage draw, less cold

U.S. natural gas futures fell about 3% on Thursday on a slightly smaller-than-expected storage draw and forecasts for less cold weather and lower gas demand over the next two weeks than previously expected.

The U.S. Energy Information Administration (EIA) said utilities pulled 81 billion cubic feet (bcf) of gas from storage during the week ended Nov. 25.

That was a little less than the 84-bcf draw analysts forecast in a Reuters poll and compares with a decrease of 54 bcf in the same week last year and a five-year (2017-2021) average decline of 34 bcf.

Last week's decrease cut stockpiles to 3.483 trillion cubic feet (tcf), or 2.4% below the five-year average of 3.569 tcf for this time of the year.

Another factor weighing on prices this week has been U.S. government efforts to reduce the risk of a railroad worker strike. A rail strike would cut coal deliveries to power plants and boost the amount of gas burned to produce electricity.

The Biden administration urged the U.S. Senate to quickly pass a bill to block a potentially crippling railroad strike, warning that the impact could be felt within days.

Traders said the wild card, which could boost gas prices later this month was if Freeport LNG's liquefied natural gas (LNG) export plant in Texas returns to service as expected.

Freeport LNG has said it plans to start producing LNG again in mid-December and reach full capacity of about 2.1 billion cubic feet per day (bcfd) in March.

The plant was 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 by the company to review the incident and propose corrective actions.

Freeport LNG, however, has not yet submitted a request to restart the plant to the U.S. Department of Transportation's Pipeline and Hazardous Materials Safety Administration (PHMSA), sources familiar with the company's filings have told Reuters.

A few ships have been waiting - some for weeks - in the Gulf of Mexico to pick up LNG from Freeport, including Prism Brilliance, Prism Diversity and Prism Courage, according to shipping data from Refinitiv.

Front-month gas futures NG1! for January delivery on the New York Mercantile Exchange fell 19.2 cents, or 2.8%, to settle at $6.738 per million British thermal units (mmBtu).

U.S. gas futures are up about 81% 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 invasion of Ukraine.

Gas was trading at $46 per mmBtu at the Dutch Title Transfer Facility (TTF) in Europe (TRNLTTFMc1) and $34 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 a record 99.5 bcfd in November, up from 99.2 bcfd in October.

With colder weather coming, Refinitiv projected average U.S. gas demand, including exports, would jump from 115.9 bcfd this week to 123.6 bcfd next week. Those forecasts were lower than Refinitiv's outlook on Wednesday.

In New England, several U.S. senators sent a letter to Energy Secretary Jennifer Granholm to develop a plan to "mitigate the risk of price hikes and a shortage of natural gas, (LNG) and heating oil."

The U.S. Northeast faces its highest energy costs in more than 25 years due to tight heating oil supplies and fierce global competition for LNG cargoes.