UPDATE 1-U.S. natgas drops 6% to 19-month low on forecasts for less cold, Freeport delay

(Updates with latest prices) Jan 25 (Reuters) - U.S. natural gas futures dropped about 6% to a 19-month low on Wednesday 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. "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 U.S. 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 U.S. 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 at Tudor Pickering Holt & Co said the gas market was heading for an oversupply situation and the gas "price needs to head lower to clear the decks of unwarranted supply growth ... to force operators to shut down drilling plans." In another sign of fading hopes that extreme cold will eventually supercharge gas prices this winter, the premium on March futures over April , which the industry calls the widow maker, fell to a deficit. That put gas futures into contango, with forward prices (April) higher than earlier contracts (March). 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. The industry calls the March-April spread the "widow maker" because rapid price moves resulting from changing weather forecasts have forced some speculators out of business. The Amaranth hedge fund, for instance, lost more than $6 billion on gas futures in 2006. "The collapsing (March-April) spread was driven by the blowtorch warmth of recent weeks and plummeting winter supply adequacy risks," said analysts at EBW. U.S. GAS OUTPUT On a daily basis, gas output was on track to drop about 1.7 bcfd over the past two days to a preliminary three-week low of 97.4 bcfd on Wednesday as cold weather starts to cause wells to freeze in some producing basins like the Bakken in North Dakota, the Permian in Texas and Appalachia in Pennsylvania. Even though the forecasts call for less cold weather over the next two weeks than previously expected, temperatures are still expected to be lower next week than this week. With colder weather coming, Refinitiv forecast U.S. gas demand, including exports, would jump from 130.9 bcfd this week to 138.7 bcfd next week. The forecast for this week was higher than Refinitiv's outlook on Tuesday, while the forecast for next week was lower. Week ended Week ended Year ago Five-year Jan 20 Jan 13 Jan 20 average (Forecast) (Actual) Jan 20 U.S. weekly natgas storage change (bcf): -82 -82 -217 -185 U.S. total natgas in storage (bcf): 2,738 2,820 2,622 2,601 U.S. total storage versus 5-year average +5.3% +1.2% Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five Year Last Year Average Average 2022 (2018-2022) Henry Hub 3.14 3.26 4.26 6.54 3.60 Title Transfer Facility (TTF) 18.15 18.80 28.25 40.50 14.39 Japan Korea Marker (JKM) 22.13 23.26 28.53 34.11 14.31 Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days Two-Week Total Forecast Current Day Prior Day Prior Year 10-Year 30-Year Norm Norm U.S. GFS HDDs 477 480 508 430 433 U.S. GFS CDDs 4 3 2 4 3 U.S. GFS TDDs 481 483 510 434 436 Refinitiv U.S. Weekly GFS Supply and Demand Forecasts Prior Week Current Week Next Week This Week Five-Year Last Year Average For Month U.S. Supply (bcfd) U.S. Lower 48 Dry Production 98.9 98.6 98.9 93.5 88.8 U.S. Imports from Canada 8.4 8.3 9.0 10.2 9.4 U.S. LNG Imports 0.0 0.0 0.0 0.2 0.4 Total U.S. Supply 107.3 107.0 108.0 103.9 98.6 U.S. Demand (bcfd) U.S. Exports to Canada 2.8 2.6 2.6 2.5 2.8 U.S. Exports to Mexico 5.3 5.3 5.2 6.0 5.3 U.S. LNG Exports 12.4 12.5 12.3 12.6 7.2 U.S. Commercial 14.8 16.5 18.7 20.4 17.1 U.S. Residential 24.5 27.8 31.9 35.0 29.8 U.S. Power Plant 29.5 32.7 33.3 32.3 28.5 U.S. Industrial 24.6 25.7 26.5 26.6 25.6 U.S. Plant Fuel 4.9 4.9 4.9 4.9 4.9 U.S. Pipe Distribution 2.7 2.9 3.2 2.9 2.4 U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1 Total U.S. Consumption 101.1 110.5 118.5 122.2 108.4 Total U.S. Demand 121.6 130.9 138.7 143.3 123.7 U.S. weekly power generation percent by fuel - EIA Week ended Week ended Week ended Week ended Week ended Jan 27 Jan 20 Jan 13 Jan 6 Dec 30 Wind 9 13 11 12 11 Solar 2 2 2 2 2 Hydro 7 7 7 7 6 Other 2 2 2 2 2 Petroleum 0 0 0 0 0 Natural Gas 39 36 38 36 35 Coal 19 18 19 18 23 Nuclear 21 21 21 23 19 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu) Hub Current Day Prior Day Henry Hub 3.35 3.43 Transco Z6 New York 3.15 3.26 PG&E Citygate 18.50 15.71 Eastern Gas (old Dominion South) 2.62 2.71 Chicago Citygate 3.12 3.20 Algonquin Citygate 3.80 3.36 SoCal Citygate 18.95 16.81 Waha Hub 2.79 2.74 AECO 2.79 2.80 SNL U.S. Power Next-Day Prices ($ per megawatt-hour) Hub Current Day Prior Day New England 53.25 47.25 PJM West 43.50 45.50 Ercot North 32.75 35.50 Mid C 157.00 157.75 Palo Verde 187.00 135.50 SP-5 149.50 142.00 (Reporting by Scott DiSavino; Editing by Andrea Ricci and Jonathan Oatis)