Tuesday, December 6

US natgas futures drop 5% on mild forecasts through mid November


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US natural gas futures dropped about 5% on Tuesday on forecasts for the weather to

remain mild for the next two weeks, which should allow utilities to keep injecting gas into storage for the

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winter through at least mid November.

That price decline came despite forecasts for higher demand over the next two weeks than previously

expected and a projected increase in liquefied natural gas (LNG) exports once Freeport LNG’s export plant in

Texas returns to service.

Freeport LNG expects its 2.1-billion-cubic-feet-per-day (bcfd) export plant to return to at least partial

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service in early- to mid-November following an unexpected shutdown on June 8 caused by a pipeline explosion.

At least four vessels were already lined up to pick up LNG at Freeport, according to Refinitiv data. Prism

Brilliance and Prism Diversity were waiting off the coast from the plant, while Prism Courage was expected to

arrive on Nov. 4 and Grace Freesia in December.

Front-month gas futures fell 28.7 cents, or 4.5%, to $6.068 per million British thermal units

(mmBtu) at 8:51 am EDT (1251 GMT). On Monday, the contract soared about 12% to its highest since Oct. 14.

Rapid price changes in recent weeks boosted the contract’s 30-day implied volatility index to

its highest since October 2021. The market uses implied volatility to estimate likely price changes in the

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future.

US gas futures were up about 66% so far this year as much higher global gas prices feed demand for US

exports due to supply disruptions and sanctions linked to Russia’s Feb. 24 invasion of Ukraine.

Gas was trading at $36 per mmBtu at the Dutch Title Transfer Facility (TTF) in Europe and $28

at the Japan Korea Marker (JKM) in Asia.

On Monday, when November was still the TTF front-month, the contract closed around $23 per mmBtu, its

lowest close since mid-February. December is now the TTF front-month. TTF closed at a record high of $90.91 on

Aug. 25.

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US gas futures lag far behind 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

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country from exporting more LNG.

Data provider Refinitiv said average gas output in the US Lower 48 states rose to a record 99.37 bcfd in

October, topping the prior record of 99.28 bcfd in September.

Daily output was on track to drop about 4.5 bcfd to a preliminary five-month low of 95.7 bcfd on Tuesday.

That would be the biggest one-day decline since the 2021 February freeze. Traders, however, noted first of the

month preliminary output was almost always unreliable and revised higher later in the month.

With the coming of seasonally cooler weather, Refinitiv projected average US gas demand, including

exports, would rise from 98.6 bcfd this week to 101.4 bcfd next week. Those forecasts were higher than

Refinitiv’s outlook on Monday.

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The average amount of gas flowing to US LNG export plants slid to 11.3 bcfd in October due to an annual

maintenance outage at the Cove Point LNG plant in Maryland, down from 11.5 bcfd in September. That is well

below the monthly record of 12.9 bcfd in March. The seven big US export plants can turn about 13.8 bcfd of

gas into LNG.

During the first 10 months of 2022, roughly 66%, or 7.0 bcfd, of US LNG exports went to Europe, as

shippers diverted cargoes from Asia to fetch higher prices. Last year, just 29%, or about 2.8 bcfd, of US

LNG exports went to Europe.

Week ended Week ended Year ago Five-year

Oct 28 Oct 21 Oct 28 average

(Forecast) (Actual) Oct 28

US weekly natgas storage change (bcf): +96 +52 +66 +45

US total natgas in storage (bcf): 3,490 3,394 3,602 3,636

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US total storage versus 5-year average -4.0% -5.5%

Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five Year

Last Year Average Average

2021 (2017-2021)

Henry Hub 6.10 6.36 5.12 3.73 2.89

Title Transfer Facility (TTF) 35.50 23.17 27.71 16.04 7.49

Japan Korea Marker (JKM) 27.54 30.16 32.98 18.00 8.95

Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days

Two-Week Total Forecast Current Day Prior Day Prior Year 10-Year 30-Year

Norm Norm

US GFS HDDs 196 187 221 228 238

US GFS CDDs 21 20 9 20 17

US GFS TDDs 217 207 230 248 255

Refinitiv US Weekly GFS Supply and Demand Forecasts

Prior Week Current Week Next Week This Week Five-Year

Last Year Average For

Month

US Supply (bcfd)

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US Lower 48 Dry Production 99.1 99.2 99.8 95.8 89.6

US Imports from Canada 7.5 8.0 8.5 8.7 8.2

US LNG Imports 0.0 0.0 0.0 0.0 0.1

Total US Supply 106.7 107.1 108.3 104.5 97.9

US Demand (bcfd)

US Exports to Canada 2.5 2.8 3.3 2.6 2.9

US Exports to Mexico 5.5 5.5 5.6 5.4 5.1

US LNG Exports 11.4 11.9 12.0 10.6 6.4

US Commercial 7.5 7.9 8.8 9.8 11.5

US Residential 9.4 10.5 12.3 13.8 17.2

US Power Plant 28.4 30.2 29.3 29.3 26.0

US Industrial 22.6 22.6 22.8 23.2 24.0

US Plant Fuel 4.9 4.9 4.9 4.9 4.9

US Pipe Distribution 2.0 2.1 2.1 2.1 2.1

US Vehicle Fuel 0.1 0.1 0.1 0.1 0.1

Total US Consumption 74.8 78.4 80.5 83.2 85.8

Total US Demand 94.2 98.6 101.4 101.8 100.2

US weekly power generation percent by fuel – EIA

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Week ended Week ended Week ended Week ended Week ended Week ended

Nov 4 Oct 28 Oct 21 Oct 14 Oct 7

Wind 6 15 11 11 9

Solar 3 3 3 4 4

Hydro 5 5 5 5 6

Other 2 2 3 3 2

Petroleum 0 0 0 0 0

Natural Gas 41 37 39 41 41

Coal 21 18 19 18 18

Nuclear 21 19 19 19 21

SNL US Natural Gas Next-Day Prices ($ per mmBtu)

Hub Current Day Prior Day

Henry Hub 5.02 5.02

Transco Z6 New York 3.25 3.42

PG&E Citygate 7.75 6.70

Dominion South 2.91 3.20

Chicago Citygate 4.14 4.47

Algonquin Citygate 4.00 3.75

SoCal Citygate 6.00 5.75

Waha Hub 3.68 3.23

AECO 4.44 1.50

SNL US Power Next-Day Prices ($ per megawatt-hour)

Hub Current Day Prior Day

New England 59.50 48.75

PJM West 56.75 47.75

Ercot North 42.00 54.50

Mid C 78.00 71.25

Palo Verde 64.75 55.50

SP-15 66.75 57.25

(Reporting by Scott DiSavino; Editing by Andrea Ricci)

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