U.S. natgas drops 5% failing to break technical resistance

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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

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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.

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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

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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 –

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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.

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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

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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

2021 (2017-2021)

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

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Norm Norm

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

Month

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

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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

Henry Hub 7.20 6.73

Transco Z6 New York 11.50 9.50

PG&E Citygate 48.33 38.78

Dominion South 5.61 5.68

Chicago Citygate 6.01 5.72

Algonquin Citygate 20.96 19.50

SoCal Citygate 50.15 45.38

Waha Hub 3.68 1.41

AECO 5.04 4.85

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

Hub Current Day Prior Day

New England 186.75 148.75

PJM West 90.00 83.50

Ercot North 50.25 45.50

Mid C 474.50 347.50

Palo Verde 400.00 358.50

SP-15 410.75 360.25

(Reporting by Scott DiSavino)