U.S. natural gas futures rose about 1% on Tuesday on forecasts for colder weather and more heating demand next week than previously expected, but expectations that Freeport LNG will delay the planned restart of its liquefied natural gas (LNG) export plant in Texas clouded the outlook.
Once the 2.1-billion cubic feet per day (bcfd) Freeport facility returns to service, U.S. gas prices should rise due to an increase in demand from LNG export plants. On the flip side, the delay in Freeport’s return means there will be less gas available for Europe to import, which helped cause prices there to spike around 9% on Tuesday. Europe needs the U.S. gas because it is not getting as much Russian fuel as usual after imposing sanctions on Moscow for Russia’s invasion of Ukraine.
Global gas markets have been extremely focused on news about Freeport this month – U.S. futures have gained or lost more than 5% on seven of the past 10 days – with some people creating fake news releases on Freeport letterhead and posting allegedly fake tweets about pipe cracks to sway the market up or down.
Some traders have called on the U.S. Commodities Futures Trading Commission (CFTC) to investigate the alleged fake news.
What is known for sure is that Freeport, as of Monday afternoon, had not submitted a request to resume service to the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA), according to sources familiar with Freeport’s filings.
That lack of filing and the time it will likely take PHMSA and other federal regulators to review and approve Freeport’s restart plan, has convinced many analysts, including experts at energy advisory firm Rapidan Energy Group, investment bank Goldman Sachs and energy consultancy Gelber & Associates, that the plant will not return to service until December at the earliest.
Until late last week, Freeport had said repeatedly that the plant, which shut after an explosion on June 8, was on track to return to service in November. The company, however, did not mention a November restart, or any restart date, in comments made on Friday or Monday.
A couple of vessels were waiting to pick up LNG from Freeport, according to Refinitiv data. Prism Diversity and Prism Courage were offshore from the plant, while LNG Rosenrot and Prism Agility were expected to arrive in late November.
But one vessel, Prism Brilliance, which had been waiting outside the Freeport plant, seems to have given up on Freeport and was now sitting outside of Corpus Christi where Cheniere Energy Inc has an LNG export plant.
Front-month gas futures were up 4.9 cents, or 0.8%, to $5.982 per million British thermal units (mmBtu) at 8:54 a.m. EST (1354 GMT).
Gas futures are up about 60% so far this year as much higher global gas prices feed demand for U.S. exports due to supply disruptions and sanctions linked to Russia’s invasion of Ukraine.
Gas was trading at $38 per mmBtu at the Dutch Title Transfer Facility (TTF) in Europe and $27 at the Japan Korea Marker (JKM) in Asia.
U.S. gas futures lag 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 have prevented the country from exporting more LNG.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states has fallen to 99.1 bcfd so far in November, down from a record 99.4 bcfd in October.
With the much colder weather coming, Refinitiv projected average U.S. gas demand, including exports, would jump from 121.7 bcfd this week to 127.0 bcfd next week. The forecast for next week was higher than Refinitiv’s outlook on Monday.