U.S. natgas falls 3% to 18-mo low on low demand forecast, possible Freeport LNG delays
U.S. natural gas futures fell about 3% to an 18-month low on Wednesday on forecasts for lower heating demand next week than previously expected and as a growing number of analysts expect Freeport LNG to again delay the restart of its liquefied natural gas export plant in Texas.
Front-month gas futures NGc1 for February delivery fell 12.3 cents, or 3.4%, to $3.516 per million British thermal units (mmBtu) at 11:19 a.m. EST (1619 GMT), putting the contract on track for its lowest close since June 2021.
A 5% drop in intraday trade earlier on Wednesday continues last year’s record volatility, with the contract now up or down more than 5% on four of the seven trading days in 2023.
That price drop kept the front-month remained in technically oversold territory, with a relative strength index (RSI) below 30 for a second day in a row.
The premium on March futures over April NGH23-J23, which the industry calls the widow maker, slid to a record low of 6 cents per mmBtu as some market participants give up hope that extreme cold will bring a price spike later this winter.
The industry uses the March-April spread to bet on the winter heating season when demand for gas peaks. It calls the spread the “widow maker” because rapid price moves resulting from changing weather forecasts have forced some speculators out of business. Among them was the Amaranth hedge fund, which lost more than $6 billion on gas futures in 2006.
Traders said the biggest market uncertainty remains the restart date for Freeport LNG’s export plant in Texas.
After several delays from October to November and then to December, Freeport now expects the facility to be back in operation in the second half of January, pending regulatory approvals.
Analysts have long said Freeport would probably be back online during the first or second quarter of 2023 because further work is required to satisfy federal regulators, including training staff in new safety procedures, before the plant can be restarted.
In recent weeks, even more analysts have said they don’t expect the plant back until February or later.
Several vessels, including Prism Diversity, Prism Courage and Prism Agility, were waiting in the Gulf of Mexico to pick up LNG from Freeport. Some have been there since early November.
Other ships, meanwhile, were sailing toward Freeport, including Corcovado LNG, which is expected to arrive in mid-January, and Prism Brilliance, Kmarin Diamond and Wilforce, expected in late January.
U.S. GAS OUTPUT RISING
Data provider Refinitiv said that average gas output in the U.S. Lower 48 states has risen to 98.3 bcfd so far in January, up from 96.7 bcfd in December. That compares with a monthly record of 99.9 bcfd in November 2022.
With the weather expected to remain warmer than normal until late January, Refinitiv projected average U.S. gas demand, including exports, would ease from 120.7 bcfd this week to 119.5 bcfd next week. The forecast for next week was lower than Refinitiv’s outlook on Tuesday.
Source: Reuters (Reporting by Scott DiSavino Editing by David Goodman )