U.S. natgas drops 5% failing to break technical resistance
U.S. natural gas futures dropped about 5% on Wednesday on forecasts for little
change in the late December cold and a failure to break through a key level of technical price resistance for a
third day in a row.
In the spot market, meanwhile, U.S. West Coast power and gas prices have almost tripled over the past
couple of weeks and were on track to hit multi-year annual highs as freezing weather and snow blankets parts of
California and gas pipeline outages and constraints limit flows into the region.
Futures prices fell even though output was on track to drop to a two-month low as extreme cold from North
Dakota to Texas caused some oil and gas wells to freeze.
That cold weather should force utilities to pull more gas from storage than usual in coming weeks. Gas
stockpiles were about 1.6% below the five-year (2017-2021) average for this time of year.
Traders said the biggest uncertainty for the market remains whether Freeport LNG would restart its
liquefied natural gas (LNG) export plant in Texas at the end of the year. Demand for gas will jump once the
plant, which can turn 2.1 billion cubic feet per day (bcfd) of gas into LNG, returns to service.
Some analysts, however, do not expect Freeport to return until January, February or later because it will
likely take federal regulators longer than Freeport LNG expects to review and approve the plant’s restart plan
once the company submits it.
The U.S. Federal Energy Regulatory Commission (FERC), one of the federal regulators that must approve
Freeport’s restart, this week called on the company to respond to a lengthy list of requirements, raising new
hurdles to its efforts to resume operations.
The Freeport plant shut on June 8 due to an explosion caused by inadequate operating and testing
procedures, human error and fatigue, according to a report by consultants hired to review the incident and
suggest corrective actions.
Despite growing analysts’ expectations that Freeport will not return until 2023, a couple of vessels –
Prism Diversity and Prism Courage – have been waiting in the Gulf of Mexico since at least early November to
pick up LNG from the plant. There were also a few vessels sailing toward the plant, with Elisa Larus expected
to arrive in late December and Point Fortin and Prism Agility expected in early January.
Front-month gas futures fell 35.3 cents, or 5.1%, to $6.582 per million British thermal units
(mmBtu) at 10:02 a.m. EST (1502 GMT).
So far this week, the contract has broken above the 200-day moving average, but has failed to remain above
that level, making it a point of key technical resistance.
U.S. gas futures are up about 76% so far this year as much higher global prices feed demand for U.S.
exports due to supply disruptions and sanctions linked to Russia’s war in Ukraine.
Gas was trading at $40 per mmBtu at the Dutch Title Transfer Facility (TTF) in Europe and $33
at the Japan Korea Marker (JKM) in Asia.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 99.7 bcfd so far in
December, up from a monthly record of 99.5 bcfd in November.
On a daily basis, however, output was on track to drop 2.3 bcfd to a preliminary two-month low of 97.3 bcfd
on Wednesday as freezing weather blankets parts of Texas, Oklahoma and North Dakota, causing well freeze-offs.
That would be the biggest daily output decline since mid October.
Energy traders, however, noted preliminary data is often revised later in the day.
With colder weather coming, Refinitiv projected average U.S. gas demand, including exports, would jump from
123.5 bcfd this week to 145.9 bcfd next week.
Week ended Week ended Year ago Five-year
Dec 9 Dec 2 Dec 9 average
(Forecast) (Actual) Dec 9
U.S. weekly natgas storage change (bcf): -42 -21 -83 -93
U.S. total natgas in storage (bcf): 3,420 3,462 3,430 3,427
U.S. total storage versus 5-year average -0.2% -1.6%
Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five Year
Last Year Average Average
Henry Hub 6.57 6.94 3.86 3.73 2.89
Title Transfer Facility (TTF) 40.72 42.90 37.67 16.04 7.49
Japan Korea Marker (JKM) 33.35 32.93 37.84 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
U.S. GFS HDDs 518 516 326 390 413
U.S. GFS CDDs 2 2 13 5 4
U.S. GFS TDDs 520 518 339 395 417
Refinitiv U.S. Weekly GFS Supply and Demand Forecasts
Prior Week Current Week Next Week This Week Five-Year
Last Year Average For
U.S. Supply (bcfd)
U.S. Lower 48 Dry Production 99.7 99.8 100.4 95.7 89.8
U.S. Imports from Canada 8.2 9.2 10.1 8.8 8.9
U.S. LNG Imports 0.0 0.0 0.0 0.0 0.3
Total U.S. Supply 107.9 109.0 110.5 104.5 99.0
U.S. Demand (bcfd)
U.S. Exports to Canada 3.2 3.5 3.5 3.7 3.2
U.S. Exports to Mexico 5.4 5.0 5.4 5.5 5.0
U.S. LNG Exports 11.7 12.4 12.5 11.9 6.9
U.S. Commercial 13.5 14.9 20.2 12.6 14.6
U.S. Residential 21.8 24.8 35.1 20.3 24.6
U.S. Power Plant 31.5 30.6 33.8 27.5 27.3
U.S. Industrial 24.1 24.4 26.9 23.5 24.9
U.S. Plant Fuel 4.9 4.9 5.0 4.9 4.9
U.S. Pipe Distribution 2.6 2.7 3.3 2.7 2.5
U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1
Total U.S. Consumption 97.6 102.5 124.5 91.6 98.9
Total U.S. Demand 117.9 123.5 145.9 112.7 114.0
U.S. weekly power generation percent by fuel – EIA
Week ended Week ended Week ended Week ended Week ended
Dec 16 Dec 9 Dec 2 Nov 25 Nov 18
Wind 10 9 15 9 9
Solar 1 2 2 2 3
Hydro 6 6 6 6 7
Other 2 2 2 2 2
Petroleum 0 0 0 0 0
Natural Gas 38 39 35 39 41
Coal 21 20 19 20 18
Nuclear 21 21 21 20 20
SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)
Hub Current Day Prior Day
Transco Z6 New York
SNL U.S. Power Next-Day Prices ($ per megawatt-hour)
Hub Current Day Prior Day
(Reporting by Scott DiSavino)
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