U.S. natgas holds at 21-month low as output drop offsets falling demand

Jan 31 (Reuters) - U.S. natural gas futures held near a 21-month low on Tuesday, keeping the contract on track for its second-biggest monthly drop in history, as a decline in output from this week's extreme cold offset forecasts for warmer weather and less heating demand next week than previously expected. Gas prices have been depressed for weeks due to a growing belief that the country has more than enough gas in storage for the rest of the winter and expectations that Freeport LNG's liquefied natural gas (LNG) export plant in Texas is still weeks away from pulling in big amounts of gas to produce LNG. Output was on track to drop about 3.4 billion cubic feet per day (bcfd) over the past week or so to a preliminary one-month low of 95.8 bcfd as cold weather and winter storms froze oil and gas wells - known as freeze-offs in the energy industry - in several states, including Texas, Oklahoma, Colorado, North Dakota and Pennsylvania. Despite this week's extreme cold, temperatures in the U.S. Lower 48 states have averaged about 42.2 degrees Fahrenheit (5.7 Celsius) so far in January, putting this month on track to be the warmest January since 2006 when the mercury averaged a record 42.8 F, according to data from Refinitiv and the federal government. Front-month gas futures for March delivery remained unchanged at $2.674 per million British thermal units at 10:04 a.m. EST (1504 GMT). On Monday, the contract closed at its lowest level since April 2021. That kept the contract in oversold territory with a relative strength index (RSI) below 30 for a second day in a row and the 15th time this year. For the month, the contract was down about 40%, putting it on track for its second-biggest monthly loss on record after dropping by 42% in January 2001. Meteorologists forecast temperatures across much of the lower 48 U.S. states would remain mostly colder than normal through Feb. 4 before turning warmer than normal from Feb. 5 through at least Feb. 15. With milder weather coming, Refinitiv forecast U.S. gas demand, including exports, would drop from 134.5 bcfd this week to 128.8 bcfd next week. The forecast for this week was higher than Refinitiv's outlook on Monday, while its forecast for next week was lower. That should allow utilities to continue pulling less gas from storage for a fourth or fifth week in a row. The biggest wild card in the gas market remains when Freeport's export plant will exit a seven-month outage caused by a fire in June 2022. Freeport is the second-biggest U.S. LNG export plant, and traders expect prices to rise once it starts pulling in big amounts of gas, boosting demand for the fuel. The plant can pull in about 2.1 bcfd of gas daily, about 2% of what U.S. gas producers take from the ground. Freeport has been pulling in small amounts of gas (about 29 million cubic feet per day) since Jan. 26 when federal regulators approved the company's plan to start cooling down parts of the plant. But the plant will not start taking in large amounts of gas until it starts producing LNG. Several analysts have said they do not expect it to start producing LNG until February, March or later. Some vessels have turned away from Freeport in recent weeks, possibly including Corcovado LNG over the past 24 hours, which seems to be heading for another port. But several tankers were still waiting in the Gulf of Mexico to pick up LNG from the plant, including Prism Courage (since around Nov. 4), Prism Agility (Jan. 2), Prism Brilliance (Jan. 26) and Kmarin Diamond (Jan. 26). 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): -138 -91 -261 -181 U.S. total natgas in storage (bcf): 2,591 2,729 2,361 2,420 U.S. total storage versus 5-year average +7.1 +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 2.63 2.68 4.26 6.54 3.60 Title Transfer Facility (TTF) 18.42 17.48 28.25 40.50 14.39 Japan Korea Marker (JKM) 19.49 19.50 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 400 417 452 420 420 U.S. GFS CDDs 5 5 3 5 4 U.S. GFS TDDs 405 422 455 425 424 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 97.1 97.6 91.7 88.8 U.S. Imports from Canada 8.3 8.6 8.5 10.2 9.4 U.S. LNG Imports 0.0 0.0 0.0 0.2 0.4 Total U.S. Supply 106.8 105.7 106.1 102.1 98.6 U.S. Demand (bcfd) U.S. Exports to Canada 2.6 2.2 2.3 2.2 2.8 U.S. Exports to Mexico 5.3 5.2 5.3 6.0 5.3 U.S. LNG Exports 12.5 12.5 12.2 12.3 7.2 U.S. Commercial 16.5 18.0 16.7 19.4 17.1 U.S. Residential 27.9 30.7 27.8 33.3 29.8 U.S. Power Plant 32.3 31.7 31.3 29.6 28.5 U.S. Industrial 25.7 26.2 25.4 26.0 25.6 U.S. Plant Fuel 4.9 4.8 4.8 4.9 4.9 U.S. Pipe Distribution 2.9 3.0 2.9 2.9 2.4 U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1 Total U.S. Consumption 110.4 114.6 109.0 116.2 108.4 Total U.S. Demand 130.8 134.5 128.8 136.7 123.7 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 14 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 34 38 36 38 36 Coal 19 19 18 19 18 Nuclear 22 21 21 21 23 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu) Hub Current Day Prior Day Henry Hub 2.82 2.83 Transco Z6 New York 3.20 2.64 PG&E Citygate 8.40 13.00 Eastern Gas (old Dominion South) 2.48 2.33 Chicago Citygate 3.42 4.13 Algonquin Citygate 12.00 3.23 SoCal Citygate 10.13 10.81 Waha Hub 3.20 2.28 AECO 2.38 2.71 SNL U.S. Power Next-Day Prices ($ per megawatt-hour) Hub Current Day Prior Day New England 87.50 33.00 PJM West 46.50 27.00 Ercot North 106.50 15.25 Mid C 100.00 172.00 Palo Verde 90.75 70.50 SP-5 91.50 71.75 (Reporting by Scott DiSavino; Editing by Paul Simao)