U.S. natural gas futures were little changed on Tuesday as the market waits for demand to rise once liquefied natural gas (LNG) export plants start to exit maintenance outages in coming weeks.
That expected demand increase was offset by record output, mild weather and low LNG exports in the past month or so, allowing utilities to boost the amount of gas in storage ahead of winter.
Major LNG outages include Berkshire Hathaway Energy’s shutdown of its 0.8 billion cubic feet per day (bcfd) Cove Point LNG export plant in Maryland on Oct. 1 for about three weeks of planned maintenance and the shutdown of Freeport LNG’s 2.0 bcfd plant in Texas for unplanned work after an explosion on June 8. Freeport expects the facility to return to at least partial service in early to mid-November.
At least three vessels were heading to Freeport, Refinitiv data showed, including Prism Brilliance (currently off the coast from the plant), Prism Diversity (expected to arrive Oct. 28) and Prism Courage (Nov. 1). Some traders expect Freeport to return to service in November while others believe the return will be delayed. Officials at Freeport have said the plant remains on track to return in November.
Front-month gas futures for November delivery rose 1.8 cents, or 0.4%, to $5.217 per million British thermal units (mmBtu) at 8:18 a.m. EDT (1218 GMT).
Despite the small gain, the contract remained technically oversold with a relative strength index (RSI) below 30 for a seventh day in a row for the first time since April 2019.
With the front month down about 60% over the past nine weeks as the market gave up on cold weather in November, the premiums on futures for December 2022 over November 2022 and November 2023 over October 2023 have hit several record highs over the past few days. Traders use the October-November and November-December spreads to bet on winter weather.
Despite weeks of declines, U.S. gas futures were still up about 39% this year as soaring global gas prices feed demand for U.S. exports due to supply disruptions and sanctions linked to Russia’s Feb. 24 invasion of Ukraine.
Gas was trading at $27 per mmBtu at the Dutch Title Transfer Facility (TTF) in Europe and $31 at the Japan Korea Marker (JKM) in Asia.
That, however, put European forwards on track for their lowest close since June 13 as mild weather and strong LNG imports allowed utilities to boost the amount of gas in storage in northwest Europe to more than 90% of capacity. TTF was down about 70% since closing at a record $90.91 on Aug. 25.
U.S. gas futures lag far behind global prices because the United States is the world’s top producer with all the fuel it needs for domestic use while capacity constraints and the Freeport outage prevent the country from exporting more LNG.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states has risen to 99.5 bcfd so far in October, compared with a monthly record of 99.4 bcfd in September.
With the coming of seasonally cooler weather, Refinitiv projected average U.S. gas demand, including exports, would rise from 93.9 bcfd this week to 97.1 bcfd next week. Those forecasts were similar to Refinitiv’s outlook on Monday.
The average amount of gas flowing to U.S. LNG export plants has fallen to 11.1 bcfd so far in October, against 11.5 bcfd in September and well below the monthly record of 12.9 bcfd in March. The seven big U.S. export plants can turn about 13.8 bcfd of gas into LNG.