Wednesday, October 5

US natgas futures edges up on threat of railroad strike


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US natural gas futures edged up to a fresh a one-week high on Tuesday on worries a

possible railroad strike could threaten coal supplies to power plants, which could force generators to burn

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more gas to produce electricity.

The White House made contingency plans seeking to ensure deliveries of critical goods in the event of a

shutdown of the US rail system while again pressing railroads and unions to reach a deal to avoid a work

stoppage affecting freight and passenger service.

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“Market players … fixed on the potential for US coal supplies to be threatened amid a looming strike

by the US railroad union workers later this week,” analysts at energy consulting firm Gelber & Associates

said, noting the market ignored several bearish factors.

Those bearish factors included record output, forecasts for lower demand next week than previously

expected and the ongoing outage at the Freeport liquefied natural gas (LNG) export plant in Texas, which has

left more gas in the United States for utilities to inject into stockpiles for next winter.

Freeport, the second-biggest US LNG export plant, was consuming about 2 billion cubic feet per day

(bcfd) of gas before it shut on June 8. Freeport LNG expects the facility to return to at least partial

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service in early to mid-November.

Front-month gas futures rose 3.5 cents, or 0.4%, to settle at $8.284 per million British thermal

units (mmBtu), their highest close since Sept. 2 for a second day in a row.

That also put the contract up for a fourth day in a row for the first time since May.

So far this year, gas futures are up about 123% as higher prices in Europe and Asia keep demand for US

LNG exports strong. Global gas prices have soared due to supply disruptions and sanctions linked to Russia’s

Feb. 24 invasion of Ukraine.

Gas was trading around $56 per mmBtu in Europe and $53 in Asia.

Russian gas exports via the three main lines into Germany – Nord Stream 1 (Russia-Germany), Yamal

(Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route – have averaged

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just 1.4 bcfd so far in September, down from 2.5 bcfd in August and 10.8 bcfd in September 2021.

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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 prevents the

country from exporting more LNG.

Data provider Refinitiv said average gas output in the US Lower 48 states have risen to 93.1 bcfd so far

in September from a record 98.0 bcfd in August.

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

would slip from 93.1 bcfd this week to 92.7 bcfd next week. The forecast for next week was lower than

Refinitiv’s outlook on Monday.

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The average amount of gas flowing to US LNG export plants has risen to 11.2 bcfd so far in September

from 11.0 bcfd in August. That compares with a monthly record of 12.9 bcfd in March. The seven big US export

plants can turn about 13.8 bcfd of gas into LNG.

The reduction in exports from Freeport is a problem for Europe, where most US LNG has gone this year as

countries there wean themselves off Russian energy.

Gas stockpiles in northwest Europe – Belgium, France, Germany and the Netherlands – were

currently about 4% above their five-year (2017-2021) average for this time of year, according to Refinitiv.

Storage was currently around 86% of capacity.

That is much healthier than US gas inventories, which were still about 12% below their five-year norm.

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Week ended Week ended Year ago Five-year

Sep 9 Sep 2 Sep 9 average

(Forecast) (Actual) Sep 9

US weekly natgas storage change (bcf): +64 +54 +78 +82

US total natgas in storage (bcf): 2,758 2,694 2,994 3,125

US total storage versus 5-year average -11.7% -11.5%

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 8.38 8.25 5.11 3.73 2.89

Title Transfer Facility (TTF) 56.25 56.49 22.61 16.04 7.49

Japan Korea Marker (JKM) 53.13 53.90 23.35 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 16 15 16 30 40

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US GFS CDDs 140 122 121 124 108

US GFS TDDs 156 137 137 154 148

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)

US Lower 48 Dry Production 99.3 98.9 99.4 93.0 87.0

US Imports from Canada 7.7 7.9 7.9 8.2 7.7

US LNG Imports 0.0 0.0 0.0 0.0 0.1

Total US Supply 107.1 106.7 107.3 101.2 95.8

US Demand (bcfd)

US Exports to Canada 2.1 2.5 2.4 2.6 2.4

US Exports to Mexico 5.4 5.6 5.6 5.8 5.3

US LNG Exports 11.3 11.1 10.5 9.8 4.9

US Commercial 4.5 4.7 4.8 4.7 4.9

US Residential 3.6 3.8 4.0 3.8 3.9

US Power Plant 41.7 37.1 37.1 34.4 33.2

US Industrial 21.4 21.3 21.3 20.7 21.2

US Plant Fuel 4.9 4.9 4.9 4.9 4.9

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US Pipe Distribution 2.1 2.0 2.0 2.0 2.1

US Vehicle Fuel 0.1 0.1 0.1 0.1 0.1

Total US Consumption 78.4 73.9 74.2 70.6 70.3

Total US Demand 97.2 93.1 92.7 88.8 82.9

US weekly power generation percent by fuel – EIA

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

Sep 16 Sep 9 Sep 2 Aug 26 Aug 19

Wind 6 6 7 5 6

Solar 3 3 3 3 3

Hydro 5 6 5 6 6

Other 2 2 2 2 2

Petroleum 0 0 0 0 0

Natural Gas 43 45 44 44 42

Coal 21 21 21 22 22

Nuclear 19 18 17 18 19

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

Hub Current Day Prior Day

Henry Hub 8.20 8.31

Transco Z6 New York 7.54 7.02

PG&E Citygate 9.60 8.82

Dominion South 7.19 7.10

Chicago Citygate 7.59 7.34

Algonquin Citygate 7.60 7.60

SoCal Citygate 8.82 7.86

Waha Hub 7.31 7.35

AECO 3.55 2.78

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

Hub Current Day Prior Day

New England 88.50 73.00

PJM West 112.75 99.50

Ercot North 79.00 77.75

Mid C 101.50 107.00

Palo Verde 81.75 91.25

SP-15 83.00 93.75

(Reporting by Scott DiSavino; Editing by Paul Simao and Jonathan Oatis)

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