US natgas prices jump 6% on big storage withdrawal, record demand forecasts (updated)

Southwestern Energy Co

11/01/2024 16:24

(Adds latest prices)
    By Scott DiSavino
       Jan 11 (Reuters) - U.S. natural gas futures jumped about 6% on Thursday, on track to close at a two-month high, on a
bigger-than-expected storage withdrawal last week and forecasts extreme cold in coming days will boost gas demand to record highs.
    The U.S. Energy Information Administration (EIA) said utilities pulled 140 billion cubic feet (bcf) of gas out of storage
during the week ended Jan. 5.
    That was more than the 119-bcf withdrawal that analysts forecast in a Reuters poll and compares with a decrease of 23 bcf in
the same week last year and a five-year (2019-2023) average decline of 89 bcf.  EIA/GAS   NGAS/POLL 
    Meteorologists forecast temperatures across most of the Lower 48 states over this weekend will drop to well below normal,
especially in the middle of the country. That frigid weather should boost gas demand to record highs and has already put power and
gas prices on track to hit their highest levels since December 2022.
    With the cold already freezing the Pacific Northwest, next-day power prices at the Mid-Columbia hub  EL-PK-MIDC-SNL  soared by
741% to a 16-month high of $850 per megawatt hour (MWh) for Thursday.
    The cold has also started to limit gas supplies by freezing oil and gas wells, pipes and other equipment in the Rockies
(Colorado and Wyoming) and Bakken shale (North Dakota).
    In February 2021, massive "freeze-offs" of wells cut gas supplies for heating and power generation in Texas and other U.S.
Central states, forcing rotating power outages because there was not enough electricity available with so many power plants shut
due to a lack of fuel and other problems. In December 2022 it happened in Appalachia.
    Front-month gas futures  NGc1  for February delivery on the New York Mercantile Exchange rose 16.6 cents, or 5.5%, to $3.205
per million British thermal units (mmBtu) at 11:28 a.m. EST (1628 GMT), putting the contract on track for its highest close since
Nov. 6.
        In other news, Chesapeake Energy  CHK.O  said it would buy smaller rival Southwestern Energy  SWN.N  in an all-stock
transaction valued at $7.4 billion, a deal that would enable the second-largest U.S. gas producer to take the top spot from
current leader EQT  EQT.N .
        
    SUPPLY AND DEMAND
    Financial company LSEG said average gas output in the Lower 48 states fell to 107.1 billion cubic feet per day (bcfd) so far
in January, down from a monthly record of 108.5 bcfd in December.
    Daily output was on track to drop by 3.7 bcfd over the last four days to a preliminary 10-week low of 104.5 bcfd on Thursday.
Those output losses were small compared with losses of 19.6 bcfd during Winter Storm Elliott in 2022 and 20.4 bcfd during the
February freeze in 2021.
    Meteorologists projected U.S. weather would switch from mostly warmer than normal now to colder than normal from Jan. 13-21
before turning back to mostly warmer than normal from Jan. 22-26.
    As heating demand soars, LSEG forecast U.S. gas demand in the Lower 48 states, including exports, would jump from 136.5 bcfd
this week to 160.5 bcfd next week. Those forecasts were lower than LSEG's outlook on Wednesday.
    On a daily basis, total U.S. gas demand, including exports, was on track to reach 162.5 bcfd on Jan. 14, 167.6 bcfd on Jan. 15
and 175.4 bcfd on Jan. 16, according to LSEG.
    Traders noted it would be unusual for gas use to hit a record on Jan. 15 since it is the Martin Luther King Day U.S. holiday
when many businesses and government offices will be shut for a long weekend.
    Those daily demand forecasts would tie and then top the current all-time high of 162.5 bcfd set on Dec. 23, 2022, during a
winter storm known as Elliott, according to federal energy data from S&P Global Commodities Insights.
        
                                                                   Week ended   Week ended    Year ago     Five-year         
                                                                     Jan 5        Dec 29        Jan 5       average    
                                                                     Actual       Actual                     Jan 5     
 U.S. weekly natgas storage change (bcf):                             -140          -14          -23          -89            
 U.S. total natgas in storage (bcf):                                 3,336         3,476        2,900        2,988           
 U.S. total storage versus 5-year average                            11.6%         13.0%                                     
                                                                                                                             
                                                                                                                             
 Global Gas Benchmark Futures ($ per mmBtu)                       Current Day    Prior Day   This Month   Prior Year    Five Year
                                                                                              Last Year     Average      Average
                                                                                                             2023      (2018-2022)
 Henry Hub  NGc1                                                      2.99         3.04         3.42         2.66         3.60
 Title Transfer Facility (TTF)  TRNLTTFMc1                            9.78         10.00        19.79        13.04        14.39
 Japan Korea Marker (JKM)  JKMc1                                     11.29         11.30        24.34        14.39        14.31
                                                                                                                             
                                                                                                                             
 LSEG 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                                                        513           523          360          442          446
 U.S. GFS CDDs                                                         2             1            4            3            3
 U.S. GFS TDDs                                                        515           524          364          445          449
                                                                                                                             
 LSEG U.S. Weekly GFS Supply and Demand Forecasts                                                                            
                                                                   Prior Week     Current     Next Week    This Week    Five-Year
                                                                                   Week                    Last Year   (2019-2023)
                                                                                                                       Average For
                                                                                                                          Month
 U.S. Supply (bcfd)                                                                                                               
 U.S. Lower 48 Dry Production                                            108.0        106.8        106.9        101.2         93.8
 U.S. Imports from Canada8                                                 9.1          9.2         10.0          9.3          9.3
 U.S. LNG Imports                                                          0.0          0.0          0.0          0.0          0.3
 Total U.S. Supply                                                       117.1        116.0        116.9        110.5        103.4
                                                                                                                                  
 U.S. Demand (bcfd)                                                                                                               
 U.S. Exports to Canada                                                    3.0          3.0          3.0          2.8          2.7
 U.S. Exports to Mexico                                                    5.3          5.9          5.3          4.8          5.3
 U.S. LNG Exports                                                         14.7         14.8         14.6         12.5          8.9
 U.S. Commercial                                                          15.7         16.4         22.6         14.9         16.6
 U.S. Residential                                                         26.0         27.8         39.9         24.1         28.6
 U.S. Power Plant                                                         36.3         34.5         38.1         29.9         29.5
 U.S. Industrial                                                          25.6         25.6         28.0         24.7         25.6
 U.S. Plant Fuel                                                           5.3          5.3          5.3          5.4          5.4
 U.S. Pipe Distribution                                                    3.0          3.0          3.7          3.0          2.9
 U.S. Vehicle Fuel                                                         0.1          0.1          0.1          0.1          0.1
 Total U.S. Consumption                                                  112.0        112.9        137.7        102.1        108.7
 Total U.S. Demand                                                       134.9        136.5        160.5        122.2        125.6
                                                                                                                                  
                                                                                                                       
 U.S. Northwest River Forecast Center (NWRFC) at The Dalles Dam   Current Day   Prior Day       2023      2022         2021      
                                                                  % of Normal   % of Normal  % of Normal  % of Normal  % of Normal
                                                                    Forecast     Forecast      Actual       Actual       Actual
 Apr-Sep                                                               80           81           83           107          81
 Jan-Jul                                                               81           82           77           102          79
 Oct-Sep                                                               83           84           76           103          81
                                                                                                                        
                                                                                                                        
 U.S. weekly power generation percent by fuel - EIA                                                                               
                                                                   Week ended   Week ended   Week ended   Week ended   Week ended
                                                                     Jan 12        Jan 5       Dec 29       Dec 22       Dec 15
 Wind                                                                  13            8           11           11           11
 Solar                                                                 2             2            2            2            3
 Hydro                                                                 5             6            7            6            6
 Other                                                                 2             2            2            2            2
 Petroleum                                                             0             0            0            0            0
 Natural Gas                                                           39           42           40           41           41
 Coal                                                                  19           19           16           18           17
 Nuclear                                                               20           20           22           20           20
                                                                                                                             
 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)                                                                          
 Hub                                                              Current Day    Prior Day                                   
 Henry Hub  NG-W-HH-SNL                                                   3.25         3.25                                       
 Transco Z6 New York  NG-CG-NY-SNL                                        2.92         3.01                                       
 PG&E Citygate  NG-CG-PGE-SNL                                             7.13         6.96                                       
 Eastern Gas (old Dominion South)  NG-PCN-APP-SNL                         2.72         2.75                                       
 Chicago Citygate  NG-CG-CH-SNL                                           2.89         3.04                                       
 Algonquin Citygate  NG-CG-BS-SNL                                         3.99         3.60                                       
 SoCal Citygate  NG-SCL-CGT-SNL                                           6.62         6.20                                       
 Waha Hub  NG-WAH-WTX-SNL                                                 2.67         2.71                                       
 AECO  NG-ASH-ALB-SNL                                                     2.56         2.39                                       
                                                                                                                                  
 SNL U.S. Power Next-Day Prices ($ per megawatt-hour)                                                                             
 Hub                                                              Current Day    Prior Day                                        
 New England  EL-PK-NPMS-SNL                                             56.00        47.75                                       
 PJM West  EL-PK-PJMW-SNL                                                34.75        35.25                                       
 Ercot North  EL-PK-ERTN-SNL                                             15.75        26.50                                       
 Mid C  EL-PK-MIDC-SNL                                                  849.80       101.00                                       
 Palo Verde  EL-PK-PLVD-SNL                                              70.50        59.50                                       
 SP-15  EL-PK-SP15-SNL                                                   74.25        64.00                                       
 
 (Reporting by Scott DiSavino; Editing by Emelia Sithole-Matarise and Barbara Lewis)
 ((scott.disavino@thomsonreuters.com; +1 332 219 1922; Reuters Messaging: scott.disavino.thomsonreuters.com@reuters.net))
 
((For gas data on LSEG's Eikon type ENERGY in the search bar and then go to the GAS drop down and the NORTH AMERICA drop down.
For Interactive Map, type 'Interactive Map' in the box at upper left of the Eikon terminal
For graphics on Baker Hughes rig counts, see: http://graphics.thomsonreuters.com/15/rigcount/index.html
For next-day SNL U.S. gas prices, see:  0#SNL-NG 
For next-day SNL U.S. power prices, see:  0#SNL-PWR 
For U.S. natgas price and storage polls, see:  NGAS/POLL 
For U.S. nuclear power outages, see:  NUKE/ 
For U.S. Northwest hydro power report, see:  NWRFC 
For U.S./Canada natural gas rig count vs Henry Hub futures price, see: http://tmsnrt.rs/2eT9k44
For the U.S. natural gas speed guide, see:  USGAS 
For the U.S. power speed guide, see:  USPOWER 
To determine CFTC managed money net position add (NYMEX Henry Hub options and futures combined  3023651MNET ) plus (ICE Henry Hub options and futures combined  3023391MNET  divided by four) plus (NYMEX Henry Hub swaps options and futures combined  303565BMNET  divided by four) plus (NYMEX Henry Hub penultimate gas swaps  303565CMNET  divided by four)
NYMEX Henry Hub options and futures combined  0#3CFTC023651 
NYMEX Henry Hub futures only  0#1CFTC023651 
ICE Henry Hub options and futures combined  0#3CFTC023391 
NYMEX Henry Hub swaps options and futures combined  0#3CFTC03565B 
NYMEX Henry Hub Penultimate gas swaps  0#3CFTC03565C ))