U.S. natural gas futures extended losses and fell more than 8% on Monday as forecasts for milder weather and the delayed restart of the Freeport liquefied natural gas (LNG) export plant dimmed the demand outlook.
Front-month gas futures for January delivery on the New York Mercantile Exchange fell 50.7 cents, or 8.1%, to $5.77 per million British thermal units (mmBtu) by 9:49 a.m. EST (1449 GMT), the lowest level since Nov. 16.
“The big factor putting downward pressure on prices today is the weather revisions. With warmer weather in the near future, less gas will be consumed in the residential and commercial sector. Our demand models show sharply lower demand for gas over the near-term,” said John Abeln, analyst with data provider Refinitiv.
Freeport LNG on Friday again delayed the restart of the second-biggest U.S. LNG export facility, moving its forecast for resuming processing to year end, pending regulatory approval.
The delay is further curtailing gas demand from the export sector, energy consulting firm Ritterbusch and Associates said in a note.
“With storage at around average levels, supplies appear adequate to meet requirements of a normal to moderately colder than normal winter. And although cold temperatures in Europe have been boosting prices, any implied increase in U.S. exports appears to be a minor consideration for now.”
The plant, which can convert 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.
“There is still plenty of winter left, a real cold snap in January or February has the potential to send prices much higher. Also, if Freeport actually does start operations at the end of this year, that should send a strong bullish signal to the market,” Abeln added.