UPDATE 3-US natgas prices climb 2% on big storage withdrawal, record demand forecasts

(Adds latest prices) By Scott DiSavino Jan 11 (Reuters) - U.S. natural gas futures climbed about 2% on Thursday on a bigger-than-expected storage withdrawal last week and forecasts that 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 decrease analysts forecast in a Reuters poll, and compares with a withdrawal of 23 bcf in the same week last year and a five-year (2019-2023) average decline of 89 bcf. Meteorologists forecast temperatures over the weekend across most of the Lower 48 states will drop to well below normal levels, especially in the middle of the country. The frigid weather is expected to 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 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. During Winter Storm Elliott in December 2022, it happened in Appalachia. Front-month gas futures for February delivery on the New York Mercantile Exchange rose 5.8 cents, or 1.9%, to settle at $3.097 per million British thermal units (mmBtu). The front-month increase boosted the premium of futures for February over March to a one-year high of around 57 cents per mmBtu. In other news, Chesapeake Energy said it would buy smaller rival Southwestern Energy in an all-stock transaction valued at $7.4 billion, a deal that would enable the second-largest U.S. gas producer to take the top spot from current leader EQT. SUPPLY AND DEMAND Financial company LSEG said average gas output in the Lower 48 states fell to 107.1 billion cubic feet per day (bcfd) so far in January, down from a monthly record of 108.5 bcfd in December. Daily output was on track to drop by 3.7 bcfd over the last four days to a preliminary 10-week low of 104.5 bcfd on Thursday. Those output losses were small compared with losses of 19.6 bcfd during Winter Storm Elliott in December 2022 and 20.4 bcfd during the February freeze in 2021. Meteorologists projected U.S. weather would switch from mostly warmer than normal now to colder than normal from Jan. 13-21 before turning back to mostly warmer than normal from Jan. 22-26. As heating demand soars, LSEG forecast U.S. gas demand in the Lower 48 states, including exports, would jump from 136.5 bcfd this week to 160.5 bcfd next week. Those forecasts were lower than LSEG's outlook on Wednesday. On a daily basis, total U.S. gas demand, including exports, was on track to reach 162.5 bcfd on Jan. 14, 167.6 bcfd on Jan. 15 and 175.4 bcfd on Jan. 16, according to LSEG. Traders noted it would be unusual for gas use to hit a record on Jan. 15 because it is the Martin Luther King Day U.S. holiday when many businesses and government offices will be shut for a long weekend. Those daily demand forecasts would tie and then top the current all-time high of 162.5 bcfd set on Dec. 23, 2022, during Winter Storm Elliott, according to federal energy data from S&P Global Commodities Insights. Week ended Week ended Year ago Five-year Jan 5 Dec 29 Jan 5 average Actual Actual Jan 5 U.S. weekly natgas storage change (bcf): -140 -14 -23 -89 U.S. total natgas in storage (bcf): 3,336 3,476 2,900 2,988 U.S. total storage versus 5-year average 11.6% 13.0% Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five Year Last Year Average Average 2023 (2018-2022) Henry Hub 2.99 3.04 3.42 2.66 3.60 Title Transfer Facility (TTF) 9.78 10.00 19.79 13.04 14.39 Japan Korea Marker (JKM) 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 3.25 3.25 Transco Z6 New York 2.92 3.01 PG&E Citygate 7.13 6.96 Eastern Gas (old Dominion South) 2.72 2.75 Chicago Citygate 2.89 3.04 Algonquin Citygate 3.99 3.60 SoCal Citygate 6.62 6.20 Waha Hub 2.67 2.71 AECO 2.56 2.39 SNL U.S. Power Next-Day Prices ($ per megawatt-hour) Hub Current Day Prior Day New England 56.00 47.75 PJM West 34.75 35.25 Ercot North 15.75 26.50 Mid C 849.80 101.00 Palo Verde 70.50 59.50 SP-15 74.25 64.00 (Reporting by Scott DiSavino; Editing by Emelia Sithole-Matarise, Barbara Lewis and Leslie Adler)