U.S. natural gas futures held near a 25-month low on Monday as rising output and forecasts for warmer weather and lower demand next week than previously expected offset a colder outlook with more heating demand for this week.
That lack of price movement came despite a growing belief that Freeport LNG’s export terminal in Texas will soon start pulling in more gas to produce liquefied natural gas (LNG). Analysts, however, have said they still do not expect Freeport to return to full LNG production until mid-March or later.
Meteorologists forecast the weather would remain mostly warmer than normal through Feb. 20 except for a few colder than normal days around the Feb. 18-19 weekend. Traders noted cold on the weekend does not have the same impact on usage as cold during the workweek because usage is low on weekends when many businesses shut.
Freeport LNG told Texas state regulators last week that it would start sending gas to one of three liquefaction trains at its long-shut export plant. The plant is waiting for permission from federal regulators to start loading LNG to free up space in its storage tanks. The liquefaction trains turn gas into LNG for export.
Freeport, the second-biggest U.S. LNG export plant, shut after a fire in June 2022. The energy market expects gas prices to rise once the plant starts producing LNG again. When operating at full power, Freeport can turn about 2.1 billion cubic feet (bcf) of gas into LNG each day. That is about 2% of total U.S. daily gas production.
Federal regulators will hold a public meeting on Freeport on Feb. 11 to provide members of the community and other interested parties an opportunity to voice their concerns about Freeport’s restart plans and get an update on what’s happening at the plant.
Even though some vessels have turned away from Freeport in recent weeks, including possibly the Prism Courage, several tankers were still waiting in the Gulf of Mexico to pick up LNG from the plant, including Prism Agility (Jan. 2), Prism Brilliance (Jan. 26), Kmarin Diamond (Jan. 26) and Nohshu Maru (Jan. 31).
Prism Courage, which had been sitting outside Freeport since early November, moved away from the plant and was now listed as available “for orders”, according to Refinitiv ship tracking data.
Front-month gas futures for March delivery on the New York Mercantile Exchange were down 1 cent, or 0.4%, to $2.400 per million British thermal units (mmBtu) at 9:11 a.m. EST (1411 GMT), putting the contract on track for its lowest close since December 2020 for a second day in a row.
In the spot market, next-day gas for Monday at the Henry Hub benchmark in Louisiana dropped about 10% to $2.40 per mmBtu, its lowest since December
U.S. GAS OUTPUT
On a daily basis, gas production was on track to reach 96.1 billion cubic feet per day (bcfd) on Monday, up from a five-week low of 93.9 bcfd on Feb. 1 when extreme cold cut output by freezing oil and gas wells – known as freeze-offs – in several states, including Texas, New Mexico, Oklahoma and Pennsylvania.
With milder weather coming, Refinitiv forecast U.S. gas demand, including exports, would drop from 127.1 bcfd this week to 121.0 bcfd next week. The forecast for this week was higher than Refinitiv’s outlook on Friday, while its forecast for next week was lower.
With the slow restart of Freeport, the average amount of gas flowing to U.S. LNG export plants rose to 12.8 bcfd so far in February, up from 12.3 bcfd in January. That compares with the monthly record of 12.9 bcfd in March 2022 before Freeport shut.