U.S. natural gas futures gained on Monday supported by forecasts of colder weather and record gas flows to liquefied natural gas export plants, while traders awaited a federal weekly storage report due later in the day.

Front-month gas futures for January delivery on the New York Mercantile Exchange rose 9.4 cents, or 2.2%, to $4.46 per million British thermal units. The contract rose 9.6% last week.

Gas futures for February delivery were up 0.8%, at $3.91 per million British thermal units.

Investors were eyeing the federal storage report expected at 12 p.m. ET on Monday, which analysts project will show U.S. energy firms withdrew 168 billion cubic feet (bcf) of natural gas from storage in the week ending December 19, exceeding the seasonal average withdrawal as extreme cold drove heating demand.

“Forecasts are turning back colder a little bit and with this wicked winter weather, people are starting to buy,” said Phil Flynn, senior analyst for Price Futures Group.

Meteorologists forecast a slight drop in temperatures nationwide through January 12, with Heating Degree Days rising from 398 on Friday to 412 on Monday, exceeding the near-normal level of 394.

Adding to bullish sentiment, average gas flows to the eight large U.S. liquefied natural gas export plants have risen to 18.5 bcfd so far this month, up from a monthly record high of 18.2 bcfd in November.

On a daily basis, LNG feedgas was set to reach a three-week high of 18.8 bcfd on Monday driven primarily by increased flows to Cheniere Energy’s 4.5-bcfd Sabine Pass plant in Louisiana, which rose to about 5.1 bcfd from an average of 4.9 bcfd over the prior seven days, according to LSEG data.

Financial firm LSEG projected average gas demand in the lower 48 states, including exports, would fall slightly from 138.4 bcfd this week to 135.8 bcfd over the next week. The forecast for this week was higher than LSEG’s outlook on Friday.

LSEG said average natural gas output in the lower 48 U.S. states climbed to a record high of 110.1 billion cubic feet per day in December, surpassing November’s monthly record of 109.6 bcfd.

“Production continues to be strong. If the cold weather doesn’t impact production, then prices will stabilize. But if this cold weather settles in for a while, then it looks like we could push prices back above $4 for the February contract,” Flynn said.

Dutch and British gas prices rose, with the European benchmark contract hitting a one-month high after the holiday break, driven by strong demand because of cold weather.
Source: Reuters