Article content
US natural gas futures plunged about 17% on Thursday to a three-month low as the
shutdown of Freeport LNG’s liquefied natural gas (LNG) export plant in Texas allowed utilities to stockpile
more fuel than expected even as hotter weather had generators burning more gas to keep air conditioners
Humming.
The market extended earlier storage-related losses of around 9% after US pipeline safety regulators said
they found unsafe conditions at Freeport and that they will not allow the plant to restart until an outside
Advertisement 2
Article content
analysis is complete.
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, so the expected 90-day outage would leave around 180 billion cubic
feet (bcf) of gas available to the US market.
The US Energy Information Administration (EIA) said utilities added 82 bcf of gas to storage during the
week ended June 24, exceeding the 74-bcf build analysts forecast in a Reuters poll and increases of 73 bcf in
the same week last year and a five-year (2017-2021) average increase of 73 bcf.
“To come in 9 bcf above the five-year average injection, in what was another notably hot week for June,
was no small feat and was a direct result of Freeport LNG’s outage, healthy renewable generation and
Advertisement 3
Article content
stealthily increasing supply last week,” analysts at Gelber & Associates said in a note.
Front-month gas futures for August delivery fell $1.074, or 16.5%, to settle at $5.424 per million
British thermal units (mmBtu), their lowest close since March 29. That was the biggest one-day percentage
decline since late January when prices fell about 26%.
For the month, the contract fell about 33% in June, its biggest monthly decline since dropping 36% in
December 2018.
That also put the contract down about 4% for the second quarter after rising about 51% during the first
quarter as much higher prices in Europe and Asia fed strong demand for US LNG exports. Russia’s Feb. 24
invasion of Ukraine stoked fears Moscow would cut gas supplies to Europe.
Advertisement 4
Article content
Gas was trading around $46 per mmBtu in Europe and $39 in Asia.
Russia’s pipeline gas exports dropped to just 2.0 bcfd on Wednesday from 3.7 bcfd on Tuesday on the three
main lines into Germany – Nord Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany) and the
Russia-Ukraine-Slovakia-Czech Republic-Germany route.
That is down from around 6.5 bcfd in mid June and an average of 11.6 bcfd in June 2021.
US futures lag far behind global prices because the United States is the world’s top producer, with all
the gas it needs for domestic use, while capacity constraints limit LNG exports.
Data provider Refinitiv said average gas output in the US Lower 48 states slid to 95.1 bcfd so far in
June from 95.2 bcfd in May and a monthly record of 96.1 bcfd in December 2021.
Advertisement 5
Article content
Daily US gas output was on track to drop 2.4 bcfd over the past four days to a preliminary nine-week low
of 93.9 bcfd after hitting a six-month high of 96.2 bcfd on Sunday. Preliminary data is often revised later in
the day.
With hotter weather coming, Refinitiv projected average US gas demand including exports would rise from
94.1 bcfd this week to 95.3 bcfd next week. The forecast for next week was lower than Refinitiv’s outlook on
Wednesday.
The average amount of gas flowing to US LNG export plants dropped to 11.1 bcfd so far in June due to the
Freeport outage from 12.5 bcfd in May and a record 12.9 bcfd in March. The seven big US export plants can
turn about 13.6 bcfd of gas into LNG.
Week ended Week ended Year ago Five-year
Advertisement 6
Article content
June 24 June 17 June 24 average
(Actual) (Actual) June 24
US weekly natgas storage change (bcf): +82 +74 +73 +73
US total natgas in storage (bcf): 2,251 2,169 2,547 2,573
US total storage versus 5-year average -12.5% -13.2%
Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five Year
Last Year Average Average
2021 (2017-2021)
Henry Hub 6.44 6.50 3.27 3.73 2.89
Title Transfer Facility (TTF) 44.35 41.84 10.27 16.04 7.49
Japan Korea Marker (JKM) 37.16 37.00 11.58 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 6 5 2 5 5
US GFS CDDs 236 230 202 197 193
US GFS TDDs 242 235 204 202 198
Advertisement 7
Article content
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 95.2 95.4 95.8 91.0 84.6
US Imports from Canada 7.7 7.8 7.8 8.0 7.7
US LNG Imports 0.0 0.0 0.0 0.0 0.1
Total US Supply 102.9 103.2 103.6 99.0 92.4
US Demand (bcfd)
US Exports to Canada 2.3 2.2 2.2 2.3 2.2
US Exports to Mexico 6.0 5.9 6.1 6.5 5.1
US LNG Exports 10.6 10.5 10.5 11.1 4.3
US Commercial 4.4 4.4 4.3 4.3 4.7
US Residential 3.7 3.5 3.6 3.5 4.3
US Power Plant 37.9 39.7 40.7 39.5 32.8
US Industrial 21.0 21.0 20.9 20.8 20.9
US Plant Fuel 4.7 4.7 4.7 4.7 4.7
US Pipe Distribution 2.0 2.0 2.0 2.0 1.8
US Vehicle Fuel 0.1 0.1 0.1 0.1 0.1
Advertisement 8
Article content
Total US Consumption 73.8 75.4 76.5 74.9 69.3
Total US Demand 92.7 94.1 95.3 94.8 80.9
US weekly power generation percent by fuel – EIA
Week ended Week ended Week ended Week ended Week ended Week ended
Jul 1 Jun 24 Jun 17 Jun 10 Jun 3
Wind 12 8 12
Solar 3 5 4
Hydro 7 7 7
Other 2 2 2
Petroleum 0 0 0
Natural Gas 38 41 36
Coal 20 20 19
Nuclear 17 19 19
SNL US Natural Gas Next-Day Prices ($ per mmBtu)
Hub Current Day Prior Day
Henry Hub
Transco Z6 New York
PG&E Citygate
Dominion South
Chicago Citygate
Algonquin Citygate
SoCal Citygate
Waha Hub
AECO
SNL US Power Next-Day Prices ($ per megawatt-hour)
Hub Current Day
New England
PJM West
Ercot North
Mid C
Palo Verde
SP-15
(Reporting by Scott DiSavino; Editing by Jan Harvey, David Gregorio and Richard Chang)
Advertisement
financialpost.com