U.S. natural gas futures fall 4% with less cold weather coming

Also weighing on gas prices were widespread expectations Freeport LNG will delay the restart of its liquefied natural gas (LNG) export plant in Texas to December or later.

In recent days, a couple of LNG vessels that were either heading for Freeport (LNG Rosenrot) or had waited outside the plant (Prism Brilliance) have moved on to other ports. LNG Rosenrot is now headed for Gibraltar, while Prism Brilliance is sitting outside Corpus Christi in Texas where Cheniere Energy Inc has an LNG export plant, ship tracking data from Refinitiv showed.

Federal pipeline safety regulators released a heavily redacted consultant’s report this week blaming inadequate operating and testing procedures, human error and fatigue for the June 8 explosion that shut the Freeport LNG plant.

Sources familiar with Freeport LNG’s filings with federal regulators have said this week that the company had not yet submitted a request to resume service to the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA). Many analysts said that means the plant will not return to service until December at the earliest.

Until late last week, Freeport LNG had said repeatedly the plant remained on track to return to service in November. In comments made in recent days, however, the company did not mention a restart date.

In other LNG news, the Cadiz Knutsen was on track to arrive at the Everett LNG terminal in Boston over the next day or two with a cargo from Trinidad, making it the first LNG vessel to go to the port since August, according to Refinitiv data.

But with Everett competing with buyers willing to pay over $30 per million British thermal units (mmBtu) for gas in Europe versus around $6 in the United States, the Massachusetts port has imported just 16.7 billion cubic feet (bcf) of gas as LNG during the first 10 months of this year. That is down from 18.1 bcf during the same period in 2021 and a five-year (2017-2021) average of 33.3 bcf, according to federal energy data.

New England depends on LNG and oil to fuel some power plants on the coldest days when most of the region’s pipeline gas is being used to heat homes and businesses. About half of the power generated in New England comes from gas-fired plants.

Front-month gas futures fell 23.4 cents, or 3.7%, to $6.135 per mmBtu at 8:55 a.m. EST (1355 GMT).

For the week the contract was on track to rise about 3% after falling about 8% last week.

Gas futures are 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 invasion of Ukraine.

Gas was trading at $34 per mmBtu at the Dutch Title Transfer Facility (TTF) in Europe and $26 at the Japan Korea Marker (JKM) in Asia.

Once the 2.1 billion-cubic-feet-per-day (bcfd) Freeport facility restarts, analysts expect U.S. gas prices to rise due to increased demand from the country’s LNG export plants.

Even though some vessels have given up on a quick restart for Freeport, a couple of vessels have been waiting outside the plant since late October/early November – Prism Diversity and Prism Courage – and one vessel was still making its way across the Atlantic Ocean toward the plant – Prism Agility.

Refinitiv projected average U.S. gas demand, including exports, would jump from 122.2 bcfd this week to 125.9 bcfd next week with the coming of colder weather before dropping to 117.3 bcfd as the weather turns less cold.