U.S. natural gas futures rose about 3% on Wednesday on forecasts of colder weather and higher heating demand over the next two weeks than previously expected.
That colder weather should force utilities to pull more gas from storage. Gas stockpiles were about 2.4% below the five-year (2017-2021) average for this time of year.
Gas futures rose despite Freeport LNG’s announcement last week that it expects to delay the restart of its liquefied natural gas export plant in Texas from mid-December to the end of the year.
Some analysts, however, do not expect Freeport to return until January, February or even later as it will likely take federal pipeline safety regulators longer than Freeport thinks to review and approve the plant’s restart plan once the company submits it.
At least one LNG vessel – Prism Brilliance – gave up on Freeport after the company delayed the planned restart last week, according to ship tracking data from Refinitiv. The ship is now on its way to Jamaica.
But, a couple of ships – Prism Diversity and Prism Courage – were still waiting in the Gulf of Mexico to pick up LNG from Freeport.
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 suggest corrective actions.
Front-month gas futures for January delivery on the New York Mercantile Exchange rose 18.4 cents, or 3.4%, to $5.653 per million British thermal units (mmBtu) at 8:04 a.m. EST (1304 GMT). On Tuesday, the contract closed at its lowest since Oct. 27 for a second day in a row.
U.S. gas futures were up about 53% 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 $44 per mmBtu at the Dutch Title Transfer Facility (TTF) in Europe and $33 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 rose to 99.6 bcfd so far in December, up from a monthly record of 99.5 bcfd in November.
With colder weather coming, Refinitiv projected average U.S. gas demand, including exports, would jump from 118.0 bcfd this week to 121.3 bcfd next week. Those forecasts were higher than Refinitiv’s outlook on Tuesday.
The average amount of gas flowing to U.S. LNG export plants held around 11.8 bcfd so far in December, the same as in November. That compares with a 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.
During the first 11 months of 2022, roughly 67%, or 7.1 bcfd, of U.S. LNG exports went to Europe as shippers diverted cargoes from Asia to get higher prices. Last year, just 29%, or about 2.8 bcfd, of U.S. LNG exports went to Europe.
Russia, the world’s second-biggest gas producer, provided about a third of Europe’s gas in recent years, totaling about 18.3 bcfd in 2021.
The European Union, however, wants to cut Russian gas imports by two-thirds by 2022 end and refill stockpiles to 80% of capacity by Nov. 1 and 90% by Nov. 1 each year from 2023.