U.S. natural gas futures closed about 3% higher on Wednesday, reversing earlier losses as colder midday weather forecasts outweighed news a few liquefied natural gas (LNG) vessels turned away from the Freeport export plant in Texas in recent days and expectations its restart will be delayed.
Federal pipeline safety regulators released a heavily redacted consultant’s report blaming inadequate operating and testing procedures, human error and fatigue for the June 8 explosion that shut the Freeport plant.
Sources familiar with Freeport LNG’s filing said the company had not yet submitted a request to resume service to the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA). Many analysts said that means the plant will not return to service until December at the earliest.
Until late last week, Freeport had said repeatedly the plant remained on track to return to service in November. In comments made in recent days, however, the company did not mention a restart date.
Once the 2.1 billion-cubic-feet-per-day (bcfd) Freeport facility restarts, U.S. gas prices will likely rise due to increased demand from the country’s LNG export plants. Until the facility restarts, less U.S. gas will be available to export to Europe, where prices have spiked around 17% this week. Europe needs U.S. gas because Russia has slashed its gas exports there after several European countries imposed sanctions on Moscow for its invasion of Ukraine.
A couple of vessels seem to have given up on a quick restart for Freeport. Prism Brilliance, which waited outside the plant for about three weeks from mid-October, was now sitting outside of Corpus Christi where Cheniere Energy Inc has an LNG export plant.
LNG Rosenrot and Prism Agility, which were expected to arrive at Freeport in late November, have turned around in the Atlantic Ocean and were now heading back east, according to Refinitiv data.
A couple of vessels, however, were still waiting outside Freeport: Prism Diversity and Prism Courage.
Worries about a possible U.S. railroad strike have underpinned gas prices because a rail strike would threaten coal deliveries to U.S. utilities, forcing generators to burn more gas.
A third U.S. rail union voted this week to reject a tentative national contract reached in September, but expects to continue negotiating to reach a deal.
Front-month gas futures rose 16.6 cents, or 2.8%, to settle at $6.200 per million British thermal units (mmBtu).
Gas futures were up about 66% 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 $35 per mmBtu at the Dutch Title Transfer Facility (TTF) in Europe and $26 at the Japan Korea Marker (JKM) in Asia.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states slid to 99.2 bcfd so far in November, down from a record 99.4 bcfd in October.
With much colder weather coming, Refinitiv projected average U.S. gas demand, including exports, would jump from 122.6 bcfd this week to 126.6 bcfd next week. The forecast for this week was higher than Refinitiv’s outlook on Tuesday, while its forecast for next week was lower.
The average amount of gas flowing to U.S. LNG export plants rose to 11.8 bcfd so far in November, up from 11.3 bcfd in October.