U.S. natgas drop 5% on delayed Freeport LNG restart, less cold forecasts

Credit: REUTERS/Andrew Cullen

Adds latest prices, Freeport restart date change

Dec 2 (Reuters) - U.S. natural gas futures dropped about 5% to a two-week low on Friday on a delayed restart for the Freeport liquefied natural gas (LNG) export plant in Texas and forecasts for milder weather and lower demand over the next two weeks than previously expected.

Milder weather should allow utilities to leave more gas in storage. Gas stockpiles were about 2.4% below the five-year (2017-2021) average for this time of year. EIA/GASNGAS/POLL

Freeport LNG delayed the expected restart of its export plant to the end of the year from mid December, pending regulatory approval.

The plant, which can turn about 2.1 billion cubic feet per day (bcfd) of gas into LNG, shut on June 8 due to an explosion caused by inadequate operating and testing procedures, human error and fatigue, according to a report by consultants hired by the company to review the incident and propose corrective actions.

A few ships have been waiting in the Gulf of Mexico to pick up LNG from Freeport, including Prism Brilliance, Prism Diversity and Prism Courage, according to shipping data from Refinitiv.

Another factor weighing on prices has been efforts by the U.S. government to reduce the risk of a railroad worker strike. A rail strike could have cut coal deliveries to power plants, forcing generators to burn more gas to produce electricity.

Analysts at energy consulting firm Gelber & Associates warned, however, that the market was shrugging off a minor weather model showing a severe polar vortex was possible in mid December.

"Many gas market players and hedge funds will not want to be short going into this weekend because of the severity of this developing situation," Gelber told customers in a note, pointing out that major weather models have missed the severity of some Arctic events in the past, like the February freeze in Texas in 2021.

Front-month gas futures NGc1 fell 32.8 cents, or 4.9%, to $6.410 per million British thermal units (mmBtu) at 1:23 p.m. EST (1823 GMT), putting the contract on track for its lowest close since Nov. 18.

That also put the contract on track to decline about 9% for the week after rising about 19% during the prior two weeks.

In the spot market, meanwhile, gas prices in California have soared about 125% over the past two weeks as freezing weather and snow blankets parts of the state and pipeline outages and constraints limit gas flows.

U.S. gas futures are up about 75% so far this year as much higher global prices feed demand for U.S. exports due to supply disruptions and sanctions linked to Russia's invasion of Ukraine.

Gas was trading at $43 per mmBtu at the Dutch Title Transfer Facility (TTF) in Europe TRNLTTFMc1 and $32 at the Japan Korea Marker (JKM) in Asia JKMc1. NG/EU

Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to a monthly record of 99.5 bcfd in November, up from 99.2 bcfd in October.

With colder weather coming, Refinitiv projected average U.S. gas demand, including exports, would jump from 115.7 bcfd this week to 121.4 bcfd next week and 129.4 bcfd in two weeks. The forecast for next week was lower than Refinitiv's outlook on Thursday.

The average amount of gas flowing to U.S. LNG export plants jumped to 12.7 bcfd so far in December, up from 11.8 bcfd in November. Although it is still early in the month, that is just shy of the monthly record of 12.9 bcfd in March despite the ongoing outage at Freeport.

Week ended Dec 2 (Forecast)

Week ended Nov 25 (Actual)

Year ago Dec 2

Five-year average Dec 2

U.S. weekly natgas storage change (bcf):

-40

-81

-59

-49

U.S. total natgas in storage (bcf):

3,443

3,483

3,513

3,520

U.S. total storage versus 5-year average

-2.2%

-2.4%

Global Gas Benchmark Futures ($ per mmBtu)

Current Day

Prior Day

This Month Last Year

Prior Year Average 2021

Five Year Average (2017-2021)

Henry Hub NGc1

6.72

6.74

3.86

3.73

2.89

Title Transfer Facility (TTF) TRNLTTFMc1

42.27

45.64

37.67

16.04

7.49

Japan Korea Marker (JKM) JKMc1

33.78

30.31

37.84

18.00

8.95

Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days

Two-Week Total Forecast

Current Day

Prior Day

Prior Year

10-Year Norm

30-Year Norm

U.S. GFS HDDs

380

394

305

347

378

U.S. GFS CDDs

8

7

8

6

5

U.S. GFS TDDs

388

401

313

353

383

Refinitiv U.S. Weekly GFS Supply and Demand Forecasts

Prior Week

Current Week

Next Week

This Week Last Year

Five-Year Average For Month

U.S. Supply (bcfd)

U.S. Lower 48 Dry Production

100.1

100.1

99.9

96.3

89.8

U.S. Imports from Canada

9.1

8.5

8.8

9.5

8.9

U.S. LNG Imports

0.0

0.0

0.0

0.0

0.3

Total U.S. Supply

109.2

108.6

108.7

105.8

99.0

U.S. Demand (bcfd)

U.S. Exports to Canada

3.3

3.4

3.5

3.4

3.2

U.S. Exports to Mexico

5.3

5.6

5.6

5.8

5.0

U.S. LNG Exports

12.0

11.8

12.5

11.8

6.9

U.S. Commercial

15.4

13.6

14.5

12.7

14.6

U.S. Residential

25.3

22.1

23.9

19.5

24.6

U.S. Power Plant

31.4

27.1

29.2

28.5

27.3

U.S. Industrial

25.3

24.3

24.5

23.5

24.9

U.S. Plant Fuel

4.9

4.9

4.9

5.0

4.9

U.S. Pipe Distribution

2.8

2.5

2.7

2.5

2.5

U.S. Vehicle Fuel

0.1

0.1

0.1

0.1

0.1

Total U.S. Consumption

105.2

94.7

99.8

91.8

98.9

Total U.S. Demand

125.8

115.7

121.4

112.8

114.0

U.S. weekly power generation percent by fuel - EIA

Week ended Dec 2

Week ended Nov 25

Week ended Nov 18

Week ended Nov 11

Week ended Nov 4

Wind

14

9

9

15

12

Solar

2

2

3

3

3

Hydro

6

6

7

6

5

Other

2

2

2

3

2

Petroleum

Natural Gas

34

39

41

38

39

Coal

19

20

18

16

18

Nuclear

22

20

20

20

20

SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)

Hub

Current Day

Prior Day

Henry Hub NG-W-HH-SNL

6.33

7.00

Transco Z6 New York NG-CG-NY-SNL

5.68

6.80

PG&E Citygate NG-CG-PGE-SNL

19.64

16.84

Dominion South NG-PCN-APP-SNL

5.20

5.74

Chicago Citygate NG-CG-CH-SNL

5.57

5.93

Algonquin Citygate NG-CG-BS-SNL

6.17

10.00

SoCal Citygate NG-SCL-CGT-SNL

19.05

18.65

Waha Hub NG-WAH-WTX-SNL

4.88

5.19

AECO NG-ASH-ALB-SNL

5.07

5.52

SNL U.S. Power Next-Day Prices ($ per megawatt-hour)

Hub

Current Day

Prior Day

New England EL-PK-NPMS-SNL

73.75

94.75

PJM West EL-PK-PJMW-SNL

56.50

73.25

Ercot North EL-PK-ERTN-SNL

38.25

47.75

Mid C EL-PK-MIDC-SNL

195.50

190.00

Palo Verde EL-PK-PLVD-SNL

150.25

134.08

SP-15 EL-PK-SP15-SNL

182.25

168.50

(Reporting by Scott DiSavino in New York Editing by Matthew Lewis)

((scott.disavino@thomsonreuters.com; +1 332 219 1922; Reuters Messaging: scott.disavino.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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