U.S. natgas jumps 7% in volatile week with Freeport LNG seen back soon

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U.S. natural gas futures jumped about 7% on Wednesday during what has already been

an extremely volatile week of trade on a drop in output at the start of the month and expectations gas demand

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will rise once the Freeport liquefied natural gas (LNG) export plant in Texas exits an outage.

That price increase came despite forecasts lower demand over the next two weeks with the weather expected

to remain mild through at least mid November. That should allow utilities to keep adding gas into storage for

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a few weeks beyond the usual Oct. 31 end of the injection season.

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

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 rose 40.7 cents, or 7.1%, to $6.121 per million British thermal units

(mmBtu) at 8:06 a.m. EDT (1206 GMT). That follows a rise of 12% on Monday and a drop of 10% on Tuesday.

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

to its highest since October 2021 for a second day in a row. The market uses implied volatility to estimate

likely price changes in the future.

The premium of futures for January over December rose to a record high of 37 cents per mmBtu

on Tuesday as the market started to give up on extreme cold in December.

In the spot market, meanwhile, gas prices for Wednesday at the Chicago hub fell to their

lowest since June 2021 as mild weather keeps heating demand there low.

Overall, U.S. gas futures were still up about 63% so far this year as much higher global gas prices feed

demand for U.S. exports due to supply disruptions and sanctions linked to Russia’s Feb. 24 invasion of

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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.

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U.S. 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

country from exporting more LNG.

Data provider Refinitiv said average gas output in the U.S. Lower 48 states fell to 97.3 bcfd so far in

November, down from a record 99.4 bcfd in October. Traders, however, noted that early month output figures

were almost always unreliable and revised higher later in the month.

With the coming of seasonally cooler weather, Refinitiv projected average U.S. gas demand, including

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exports, would rise from 98.1 bcfd this week to 100.0 bcfd next week. Those forecasts were lower than

Refinitiv’s outlook on Tuesday.

The average amount of gas flowing to U.S. LNG export plants rose to 11.5 bcfd so far in November with the

return of Berkshire Hathaway Energy’s Cove Point export plant in Maryland from a maintenance outage, up from

11.3 bcfd in October.

That is still well below the monthly record of 12.9 bcfd in March due mostly to the ongoing outage at

Freeport. The seven big U.S. 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 U.S. 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 U.S.

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LNG exports went to Europe.

Week ended Week ended Year ago Five-year

Oct 28 Oct 21 Oct 28 average

(Forecast) (Actual) Oct 28

U.S. weekly natgas storage change (bcf): +96 +52 +66 +45

U.S. total natgas in storage (bcf): 3,490 3,394 3,602 3,636

U.S. 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 5.90 5.71 5.12 3.73 2.89

Title Transfer Facility (TTF) 35.68 33.78 27.71 16.04 7.49

Japan Korea Marker (JKM) 27.54 27.54 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

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Norm Norm

U.S. GFS HDDs 203 196 221 228 243

U.S. GFS CDDs 22 21 9 20 16

U.S. GFS TDDs 225 217 230 248 259

Refinitiv U.S. Weekly GFS Supply and Demand Forecasts

Prior Week Current Week Next Week This Week Five-Year

Last Year Average For

Month

U.S. Supply (bcfd)

U.S. Lower 48 Dry Production 99.1 99.0 99.4 95.8 89.6

U.S. Imports from Canada 7.5 7.5 8.0 8.7 8.2

U.S. LNG Imports 0.0 0.0 0.0 0.0 0.1

Total U.S. Supply 106.7 106.5 107.4 104.5 97.9

U.S. Demand (bcfd)

U.S. Exports to Canada 2.5 2.7 3.0 2.6 2.9

U.S. Exports to Mexico 5.5 5.6 5.7 5.4 5.1

U.S. LNG Exports 11.4 11.9 12.0 10.6 6.4

U.S. Commercial 7.5 7.9 8.4 9.8 11.5

U.S. Residential 9.4 10.4 11.9 13.8 17.2

U.S. Power Plant 28.4 29.9 29.3 29.3 26.0

U.S. Industrial 22.6 22.6 22.6 23.2 24.0

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U.S. Plant Fuel 4.9 4.9 4.9 4.9 4.9

U.S. Pipe Distribution 2.0 2.1 2.1 2.1 2.1

U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1

Total U.S. Consumption 74.8 77.9 79.4 83.2 85.8

Total U.S. Demand 94.2 98.1 100.0 101.8 100.2

U.S. weekly power generation percent by fuel – EIA

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 U.S. Natural Gas Next-Day Prices ($ per mmBtu)

Hub Current Day Prior Day

Henry Hub 4.57 5.02

Transco Z6 New York 3.13 3.25

PG&E Citygate 7.85 7.75

Dominion South 2.96 2.91

Chicago Citygate 3.28 4.14

Algonquin Citygate 3.65 4.00

SoCal Citygate 7.72 6.00

Waha Hub 2.37 3.68

AECO 4.05 4.44

SNL U.S. Power Next-Day Prices ($ per megawatt-hour)

Hub Current Day Prior Day

New England 42.75 59.50

PJM West 56.75 56.75

Ercot North 32.50 42.00

Mid C 74.25 78.00

Palo Verde 62.50 64.75

SP-15 73.25 66.75

(Reporting by Scott DiSavino, Editing by Nick Zieminski)