U.S. natural gas futures jumped 6% to a one-week high on Dec. 9 on forecasts for much colder weather and higher heating demand through late December than previously expected.
In the spot market, U.S. West Coast power and gas prices have more than doubled over the past couple of weeks - with gas hitting multi-year highs - as freezing weather and snow blankets parts of California and gas pipeline outages and constraints limit flows of the fuel from Texas.
That colder weather should force utilities to pull more gas from storage in coming weeks. Gas stockpiles were about 1.6% below the five-year (2017-2021) average for this time of year.
The increase in futures prices came despite Freeport LNG's announcement last week that it will delay the planned restart of its LNG export plant in Texas from mid-December to the end of the year. That delay should keep LNG exports below record levels hit in March and leave more gas in the United States for domestic use.
Some analysts do not expect Freeport to return until January, February or later because it will likely take federal pipeline safety regulators longer than Freeport expects 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, according to ship tracking data from Refinitiv. The ship started heading for Jamaica earlier this week but turned back and is now on its way to Cheniere Energy Inc.'s Sabine Pass LNG export plant in Louisiana.
Two other vessels - Prism Diversity and Prism Courage - however, have continued to wait in the Gulf of Mexico since at least early November to pick up LNG from Freeport.
The Freeport plant, which can turn about 2.1 Bcf/d 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 to review the incident and suggest corrective actions.
Front-month gas futures for January delivery on the New York Mercantile Exchange rose 34.4 cents, or 5.8%, to $6.306/MMBtu at 10:30 a.m. EST, putting the contract on track for its highest close since Nov. 1.
For the week, the front-month was up about 1% after falling about 11% last week.
U.S. gas futures were up about 69% 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 $44/MMBtu at the Dutch Title Transfer Facility (TTF) in Europe and $34 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 rose to 99.7 Bcf/d so far in December, up from a monthly record of 99.5 Bcf/d in November.
With colder weather coming, Refinitiv projected average U.S. gas demand, including exports, would rise from 117.8 Bcf/d this week to 123.1 Bcf/d next week and 142.0 Bcf/d in two weeks. The forecasts for next week was higher than Refinitiv's outlook on Dec. 8.
The average amount of gas flowing to U.S. LNG export plants rose to 11.9 Bcf/d so far in December, up from 11.8 Bcf/d in November. That remains below the monthly record of 12.9 Bcf/d in March due to the Freeport outage.
Recommended Reading
Analyst: Is Jerry Jones Making a Run to Take Comstock Private?
2024-09-20 - After buying more than 13.4 million Comstock shares in August, analysts wonder if Dallas Cowboys owner Jerry Jones might split the tackles and run downhill toward a go-private buyout of the Haynesville Shale gas producer.
BKV Prices IPO at $270MM Nearly Two Years After First Filing
2024-09-25 - BKV Corp. priced its common shares at $18 each after and will begin trading on Sept. 26, about two years after the Denver company first filed for an IPO.
Sheffield: E&Ps’ Capital Starvation Not All Bad, But M&A Needs Work
2024-10-04 - Bryan Sheffield, managing partner of Formentera Partners and founder of Parsley Energy, discussed E&P capital, M&A barriers and how longer laterals could spur a “growth mode” at Hart Energy’s Energy Capital Conference.
Investor Returns Keep Aethon IPO-ready
2024-10-08 - Haynesville producer Aethon Energy is focused on investor returns, additional bolt-on acquisitions and mainly staying “IPO ready,” the company’s Senior Vice President of Finance said Oct. 3 at Hart Energy’s Energy Capital Conference (ECC) in Dallas.
Endeavor Energy Founder Autry Stephens Dies at 86
2024-08-16 - Stephens created a legacy in the Permian Basin that Endeavor said will continue to shape the future of the company.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.