U.S. natgas drops 4% to 20-month low ahead of expiration, milder forecasts

       Jan 26 (Reuters) - U.S. natural gas futures dropped 4% to a 20-month low on Thursday despite a big weekly
storage draw, as forecasts called for milder weather and lower heating demand next week than previously expected.
    Futures tumbled as much as 10% but pared losses after federal regulators approved Freeport LNG's plan to start
cooling down parts of its liquefied natural gas (LNG) export plant in Texas, feeding hopes the plant could return in
weeks rather than months.
        The cooldown process is not the start of LNG production at Freeport. Several analysts have said LNG production
will likely not happen until March or later.

        The February contract expires on Friday as the front-month on the New York Mercantile Exchange. Volatility
often peaks near expiry because trading volumes are low.
    In 2022, gas prices soared by a record 46% on the day the February contract expired, then pluged 26% the next day
when the March contract became the front-month.
    The U.S. Energy Information Administration (EIA) said U.S. utilities pulled 91 billion cubic feet (bcf) of gas
from storage during the week ended Jan. 20, more than the 82-bcf decline analysts forecast in a Reuters poll.

    Analysts said last week's build was much smaller than average because the weather then was warmer than normal,
keeping heating demand low.
    The market expects gas prices and demand to rise when operations resume at Freeport, the second-biggest U.S. LNG
exporter, which shut after a fire in June 2022. The plant is capable of pulling in about 2.1 billion cubic feet per
day (bcfd) of gas and turning it into LNG, about 2% of what U.S. gas producers pull from the ground.
    Small amounts of pipeline gas started flowing to Freeport on Thursday, according to Refinitiv data. A source
familiar with the plant said Freeport was using the gas to maintain a flare system and fuel the turbine generator and
heaters.
        On its second-to-last day as the front-month, gas futures for February delivery fell 12.3 cents, or
4.0%, to settle at $2.944 per million British thermal units (mmBtu), their lowest close since May 2021.
        The March contract, which will soon be the front-month, was down about 10 cents at $2.82 per mmBtu.
    Recent increases in crude futures to a nine-week high boosted oil's premium over gas to its highest since
January 2020. Over recent years that premium has prompted U.S. energy firms to focus drilling activity on finding more
oil instead of gas.
    The oil-to-gas ratio, or level at which oil trades compared with gas, jumped to 29-to-1 on Thursday. Crude's
average premium over gas was 15 times gas in 2022 and the five-year average (2018-2022) is 20 times. On an energy
equivalent basis, oil should trade only six times over gas.
                                                     Week ended     Week ended     Year ago    Five-year
                                                       Jan 20         Jan 13        Jan 20      average
                                                      (Actual)       (Actual)                    Jan 20
 U.S. weekly natgas storage change (bcf):                -91            -82          -217         -185
 U.S. total natgas in storage (bcf):                    2,729          2,820         2,622       2,601
 U.S. total storage versus 5-year average               +4.9           +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                                              2.86           3.07          4.26         6.54        3.60
 Title Transfer Facility (TTF)                          17.92          17.85         28.25       40.50        14.39
 Japan Korea Marker (JKM)                               20.94          22.13         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                                           448            477           508         430          431
 U.S. GFS CDDs                                            4              4             2           4            4
 U.S. GFS TDDs                                           452            481           510         434          435

 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           98.4          98.6         93.5        88.8
 U.S. Imports from Canada                                8.4            8.3           8.8         10.2         9.4
 U.S. LNG Imports                                        0.0            0.0           0.0         0.2          0.4
 Total U.S. Supply                                      107.3          106.7         107.4       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          12.4         12.6         7.2
 U.S. Commercial                                        14.8           16.5          18.4         20.4        17.1
 U.S. Residential                                       24.5           27.8          31.3         35.0        29.8
 U.S. Power Plant                                       29.5           32.6          33.4         32.3        28.5
 U.S. Industrial                                        24.6           25.7          26.3         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           3.1         2.9          2.4
 U.S. Vehicle Fuel                                       0.1            0.1           0.1         0.1          0.1
 Total U.S. Consumption                                 101.1          110.4         117.5       122.2        108.4
 Total U.S. Demand                                      121.6          130.8         137.7       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                                             40             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 3.09           3.35
 Transco Z6 New York 3.05           3.15
 PG&E Citygate 15.31          18.50
 Eastern Gas (old Dominion South) 2.61           2.62
 Chicago Citygate 2.97           3.12
 Algonquin Citygate 4.22           3.80
 SoCal Citygate 17.00          18.95
 Waha Hub 2.48           2.79
 AECO 2.62           2.79

 SNL U.S. Power Next-Day Prices ($ per megawatt-hour)
 Hub                                                 Current Day     Prior Day
 New England 47.75          53.25
 PJM West 37.50          43.50
 Ercot North 28.00          32.75
 Mid C 142.25         157.00
 Palo Verde 102.25         187.00
 SP-5 133.00         149.50
 (Reporting by Scott DiSavino
Editing by Nick Zieminski, John Stonestreet and David Gregorio)