U.S. natgas rebounds as focus returns to higher summer demand

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U.S. natural gas futures rebounded over 6% on Wednesday as focus returned to soaring demand amid heat waves, stabilizing after a 17% slide in the last session on expectations that an extended Freeport LNG export hub outage would increase domestic stocks. Front-month gas futures for July delivery on the New York Mercantile Exchange rose 6.1% to $7.630 per million British thermal units at 9:39 a.m. EDT (1339 GMT). Prices settled 17% lower on Tuesday, registering their lowest close since May 9.

Goldman Sachs raised its summer Henry Hub prices forecasts to $7.15 per MMBtu from $6.80 previously, reasoning that the higher U.S. stocks due to the Freeport outage would be offset by hotter temperatures and stronger-than-expected power and residential demand.

News that the Freeport restart could take 90 days rather than the initial three-week estimate, following an explosion last week, also exacerbated concerns over gas shortages in Europe and pushed up prices in the region.

Freeport, the second-biggest U.S. LNG export plant, consumes about 2 billion cubic feet per day (bcfd) of gas, so a 90-day shutdown would result in about 180 billion cubic feet (bcf) more gas being available to the U.S. market.

U.S. storage is currently about 15%, or 340 bcf, below normal levels for this time of year, its lowest since April 2019.

“We’re likely to see consolidation the rest of the week,” said Christin Kelley, senior commodity analyst at Schneider Electric, also pegging the rebound to some investors covering their shorts, helped by the fact that prices now seem to be holding well above technical support around $7.33/MMBtu.

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“At this point, the market has already priced in the news of the extended Freeport outage, so we’re unlikely to see any large downside moves near term as a direct response to the situation,” Kelley added.

Power demand in Texas failed to hit a new all-time high on Monday due to less hot weather, but will likely break peak use records later this week as homes and businesses keep air conditioners cranked up to escape a lingering heatwave.

Low wind power forces generators, including those in Texas – the state with the most wind power – to burn more gas to keep the lights on.

U.S. gas futures were still up about 103% this year as much higher prices in Europe and Asia keep demand for U.S. LNG exports strong, especially since Russia’s Feb. 24 invasion of Ukraine stoked fears Moscow might cut gas supplies to Europe.

The seven big U.S. export plants can turn about 13.6 bcfd of gas into LNG.