U.S. natural gas futures were little changed on Thursday as the market waited for direction from a federal report expected to show last week’s storage withdrawal was smaller than usual because the weather then was still warmer than normal and heating demand was low.
That lack of price movement came despite bearish forecasts for less cold weather and lower heating demand in late December than previously expected.
That lack of price movement also came despite a bullish increase in gas flows to liquefied natural gas (LNG) export plants to their highest since before the Freeport LNG export plant shut in June and a drop in gas output to a two-month low as extreme cold from North Dakota to Texas caused oil and gas wells to freeze.
Analysts forecast U.S. utilities pulled 45 billion cubic feet (bcf) of gas from storage during the week ended Dec. 9. That compares with a decrease of 83 bcf in the same week last year and a five-year (2017-2021) average decline of 93 bcf.
If correct, last week’s decrease would cut stockpiles to 3.417 trillion cubic feet (tcf), or 0.3% below the five-year average of 3.427 tcf for this time of year.
Traders said the biggest uncertainty for the market remains when Freeport LNG will restart its LNG export plant in Texas.
After several delays, the company has said it was on track to restart the plant by the end of the year. Many analysts, however, have said they do not expect Freeport to return until the first quarter of 2023 because the company still has a lot of work to do to satisfy federal regulators before the plant is ready to restart.
Once Freeport returns, demand for gas will jump. The plant can turn about 2.1 billion cubic feet per day (bcfd) of gas into LNG.
Freeport 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 to review the incident and suggest corrective actions.
A couple of vessels – Prism Diversity and Prism Courage – have been waiting in the Gulf of Mexico to pick up LNG from Freeport since at least early November. There are also several other ships sailing toward the plant, including Elisa Larus, which is expected to arrive in late December, Point Fortin and Prism Agility (early January) and Wilforce (late January).
Despite the Freeport shutdown, the amount of gas flowing to U.S. LNG export plants hit 13.0 bcfd on Thursday, the most since June 4 – four days before Freeport shut. That’s because the nation’s six other big export plants were operating near full capacity.
Front-month gas futures for January delivery on the New York Mercantile Exchange fell 1.5 cents, or 0.2%, to $6.415 per million British thermal units at 8:29 a.m. EST (1329 GMT). On Wednesday, the contract jumped over 7%.
Gas futures were up about 72% 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 war in Ukraine.
Gas was trading at $42 per mmBtu at the Dutch Title Transfer Facility (TTF) in Europe and $33 at the Japan Korea Marker (JKM) in Asia.
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.
On a daily basis, however, output was on track to drop about 3.4 bcfd over the past three days to a preliminary two-month low of 97.2 bcfd on Thursday as freezing weather blankets parts of Texas, Oklahoma and North Dakota, causing well freeze-offs.