U.S. natgas futures gain 3% on colder forecasts ahead of storage report

Feb 2 (Reuters) - U.S. natural gas futures rose about 3% on Thursday from a 21-month low in the prior session on forecasts for higher heating demand over the next two weeks than previously expected and growing expectations the Freeport liquefied natural gas (LNG) export plant in Texas could start pulling in big amounts of gas in February. On Wednesday, federal regulators approved Freeport's plan to start sending gas to one of the plant's three liquefaction trains, which turn gas into LNG. Freeport, the second-biggest U.S. LNG export plant, shut in a fire in June 2022. The energy market expects gas prices to rise once the plant starts pulling in large amounts of gas. Freeport can turn about 2.1 billion cubic feet (bcf) of gas into LNG each day. That is about 2% of total U.S. daily gas production. Gas prices were also supported by this week's roughly 3.7 billion cubic feet per day (bcfd) drop in gas output to a one-month low of 93.9 bcfd as winter storms freeze oil and gas wells - known as freeze-offs - in several states, including Texas, Oklahoma, New Mexico and Pennsylvania. The price increase also came ahead of a federal report expected to show that last week's storage withdrawal was smaller than usual for a fourth week in a row as mild weather in January depressed demand for gas for heating. Analysts forecast U.S. utilities pulled just 142 bcf of gas from storage during the week ended Jan. 27. That compares with a decrease of 261 bcf in the same week last year and a five-year (2018-2022) average decline of 181 bcf. If correct, last week's decrease would cut stockpiles to 2.587 trillion cubic feet (tcf), or 6.9% above the five-year average of 2.420 tcf for this time of year. Front-month gas futures for March delivery on the New York Mercantile Exchange (NYMEX) rose 6.3 cents, or 2.6%, to $2.531 per million British thermal units at 9:09 a.m. EST (1409 GMT). On Wednesday, the contract closed at its lowest since April 2021. Despite the price rise, the contract remained in oversold territory with a relative strength index (RSI) below 30 for a fourth day in a row and the 17th time so far this year. With interest in gas markets rising in recent weeks, open interest in the NYMEX front-month jumped to over 297,000 contracts, its highest since August 2021 for a third day in a row. Shares traded in the U.S. Natural Gas Fund, an exchange-traded fund (ETF) designed to track the daily price movement of gas, reached a record high of 48.7 million on Wednesday, blowing past the prior all-time high of 43.1 million in November 2018. UNG shares outstanding, meanwhile, have more than doubled over the past four weeks to an all-time high of 81.2 million on Wednesday after hitting fresh record highs every day since Jan. 13. Meteorologists forecast temperatures across much of the U.S. Lower 48 states would remain below normal through Feb. 4 before rising to mostly above-normal levels from Feb. 5 through at least Feb. 17. Those above normal levels, however, were lower than previously expected. Refinitiv forecast U.S. gas demand, including exports, would drop from 137.4 bcfd this week to 128.1 bcfd next week. Those forecasts are higher than Refinitiv's outlook on Wednesday. The average amount of gas flowing to U.S. LNG export plants rose to 12.6 bcfd so far in February, up from 12.3 bcfd in January. That compares with the monthly record of 12.9 bcfd in March 2022 before Freeport shut. The seven big U.S. export plants, including Freeport, can turn about 13.8 bcfd of gas into LNG. Week ended Week ended Year ago Five-year Jan 27 Jan 20 Jan 27 average (Forecast) (Actual) Jan 27 U.S. weekly natgas storage change (bcf): -142 -91 -261 -181 U.S. total natgas in storage (bcf): 2,587 2,729 2,361 2,420 U.S. total storage versus 5-year average +6.9 +4.9% Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five Year Last Year Average Average 2022 (2018-2022) Henry Hub 2.49 2.47 4.46 6.54 3.60 Title Transfer Facility (TTF) 18.56 19.10 26.94 40.50 14.39 Japan Korea Marker (JKM) 18.97 19.03 25.82 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 388 388 452 420 415 U.S. GFS CDDs 5 4 3 5 4 U.S. GFS TDDs 393 392 455 425 419 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 98.5 95.9 95.8 91.7 87.7 U.S. Imports from Canada 8.3 8.3 8.6 10.2 9.1 U.S. LNG Imports 0.0 0.0 0.0 0.2 0.2 Total U.S. Supply 106.8 104.3 104.4 102.1 97.0 U.S. Demand (bcfd) U.S. Exports to Canada 2.6 2.2 2.4 2.2 2.7 U.S. Exports to Mexico 5.3 5.1 5.3 6.0 5.2 U.S. LNG Exports 12.5 12.6 12.2 12.3 6.6 U.S. Commercial 16.5 18.3 16.5 19.4 16.4 U.S. Residential 27.9 31.4 27.3 33.3 27.7 U.S. Power Plant 32.3 33.6 31.7 29.6 28.1 U.S. Industrial 25.7 26.1 24.9 26.0 25.2 U.S. Plant Fuel 4.9 4.7 4.7 4.9 4.8 U.S. Pipe Distribution 2.9 3.1 2.9 2.9 3.1 U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1 Total U.S. Consumption 110.4 117.4 108.2 116.2 105.4 Total U.S. Demand 130.8 137.4 128.1 136.7 119.9 U.S. weekly power generation percent by fuel - EIA Week ended Week ended Week ended Week ended Week ended Feb 3 Jan 27 Jan 20 Jan 13 Jan 6 Wind 10 11 13 11 12 Solar 2 2 2 2 2 Hydro 7 7 7 7 7 Other 2 2 2 2 2 Petroleum 0 0 0 0 0 Natural Gas 38 38 36 38 36 Coal 20 19 18 19 18 Nuclear 20 21 21 21 23 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu) Hub Current Day Prior Day Henry Hub 2.65 2.65 Transco Z6 New York 4.13 4.76 PG&E Citygate 17.41 11.94 Eastern Gas (old Dominion South) 2.50 2.53 Chicago Citygate 2.67 2.83 Algonquin Citygate 12.75 4.85 SoCal Citygate 15.86 12.62 Waha Hub 2.52 2.98 AECO 2.22 2.36 SNL U.S. Power Next-Day Prices ($ per megawatt-hour) Hub Current Day Prior Day New England 99.00 111.00 PJM West 40.50 43.00 Ercot North 42.00 94.50 Mid C 152.50 105.00 Palo Verde 89.00 97.00 SP-5 145.50 98.00 (Reporting by Scott DiSavino Editing by Nick Zieminski)