U.S. natural gas futures jumped about 7% to a two-week high on Tuesday on forecasts for colder weather and higher heating demand through at least the end of December.
That colder weather should force utilities to pull more gas from storage than usual in coming weeks. Gas stockpiles were about 1.6% below the five-year (2017-2021) average for this time of year.
Traders said the biggest uncertainty for the market was whether Freeport LNG would restart its liquefied natural gas (LNG) export plant in Texas at the end of the year. Demand for gas will rise once the plant, which can turn 2.1 billion cubic feet per day (bcfd) of gas into LNG, returns to service.
Some analysts, however, do not expect the Freeport plant to return until January, February or later because it will likely take federal regulators longer than Freeport expects to review and approve the plant’s restart plan once the company submits it.
The U.S. Federal Energy Regulatory Commission (FERC), one of the regulators that must approve Freeport’s restart, called on the company to respond to a lengthy list of requirements, raising new hurdles to its efforts to resume operations.
The Freeport plant 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.
Despite growing analysts’ expectations that Freeport will not return until 2023, a couple of vessels – Prism Diversity and Prism Courage – have been waiting in the Gulf of Mexico since at least early November to pick up LNG from the plant. There are also a few vessels sailing toward the plant, with Elisa Larus expected to arrive in late December and Point Fortin and Prism Agility expected in early January.
Front-month gas futures for January delivery on the New York Mercantile Exchange were up 43.2 cents, or 6.6%, to $7.019 per million British thermal units (mmBtu), at 8:51 a.m. EST (1351 GMT), putting the contract on track for its highest close since Nov. 29.
That also put the front-month on track to rise for a fifth day in a row for the first time since September. So far this week, the contract has not been able to break above the 200-day moving average, a point of key technical resistance.
U.S. gas futures are up about 87% 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 $43 per mmBtu at the Dutch Title Transfer Facility (TTF) in Europe and $33 at the Japan Korea Marker (JKM) in Asia.
TOP PRODUCER
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 has risen to 99.8 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 123.2 bcfd this week to 145.7 bcfd next week. Those forecasts were similar to Refinitiv’s outlook on Monday.
The average amount of gas flowing to U.S. LNG export plants has risen to 12.1 bcfd so far in December, up from 11.8 bcfd in November. That remains below the monthly record of 12.9 bcfd in March due to the Freeport outage.
The seven big U.S. export plants can turn about 13.8 bcfd of gas into LNG.