U.S. natural gas futures jumped about 7% on Monday from a 19-month low in the prior session on forecasts for colder weather and higher heating demand over the next two weeks than previously expected.
That price increase came even though many in the market believe the United States has more than enough gas in storage for the rest of the winter and growing expectations that Freeport LNG’s liquefied natural gas (LNG) export plant in Texas will not return to service until February or later.
Freeport LNG, meanwhile, has said repeatedly that the plant is on track to restart in the second half of January, pending regulatory approvals. Analysts, however, don’t believe that timeline because the company has already delayed its planned restart many times from October to November to December and most recently to January.
Even when the company was saying the plant could restart in 2022, many analysts projected it would likely take Freeport until the first or second quarter of 2023 to get the plant ready due to the large amount of work needed to satisfy federal regulators, including training staff in new safety procedures.
The market cares about Freeport because prices will likely jump once it returns to service as demand for gas rises. The facility, which shut in a fire on June 8, 2022, can pull in around 2.1 billion cubic feet per day (bcfd) of gas and turn it into LNG when operating at full power. That is about 2% of U.S. daily production.
U.S. gas stockpiles were about 1% above the five-year (2018-2022) average for this time of year. Analysts expect the U.S. Energy Information Administration will report this week that the amount of gas in storage rose to about 5% above normal.
Front-month gas futures for February delivery rose 22.6 cents, or 7.1%, to $3.400 per million British thermal units (mmBtu) at 9:23 a.m. EST (1423 GMT). On Friday, the contract closed at its lowest since June 10, 2021.
But with prices down about 52% over the past five weeks, gas speculators last week boosted their net short futures and options positions on the New York Mercantile and Intercontinental Exchanges to the most since March 2020, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.
Shares outstanding in the U.S. Natural Gas Fund, an exchange-traded fund (ETF) designed to track the daily price movement of gas, hit 55.2 million on Friday, its fourth record high in a row, according to Refinitiv data. Purchases of UNG so far this year have already hit three of the top 10 biggest daily share purchases on record.
With colder weather coming, Refinitiv forecast U.S. gas demand, including exports, would jump from 130.8 bcfd this week to 139.9 bcfd next week. Those forecasts were higher than Refinitiv’s outlook on Friday.
Traders said the biggest uncertainty in the market remains when the Freeport plant will return.
Even though vessels have turned away from Freeport in recent weeks, several tankers were waiting in the Gulf of Mexico to pick up LNG from the plant, including Prism Diversity since around Oct. 28, Prism Courage since around Nov. 4, Prism Agility since around Jan. 2 and Corcovado LNG since around Jan. 15.
In addition, other ships were sailing toward Freeport with both Prism Brilliance and Kmarin Diamond expected to arrive around Jan. 29.
In other LNG news, the Cadiz Knutsen was expected to arrive at Constellation Energy Corp’s Everett LNG terminal in Massachusetts over the next day or two with a fourth cargo of the super-cooled fuel from Trinidad this winter. Cadiz Knutsen also delivered LNG to Everett in November and December and early January.