U.S. natural gas futures held near a eight-week low on Dec. 21 as the market balanced extreme cold in the short term that has already cut output by freezing oil and gas wells and boosted heating demand against milder long-term forecasts that will cut heating demand.
The weather is frigid now across much of the country, but if the current forecasts are right and the weather turns warmer-than-normal in late December and early January, utilities will be able to leave more gas in storage around the start of the new year.
Gas stockpiles are currently about 0.4% below the five-year (2017-2021) average for this time of year.
U.S. gas futures remained on track for their most volatile year ever. Both implied and historic volatility were expected to hit record highs in 2022 as soaring global gas prices fed demand for U.S. LNG exports due to supply disruptions and sanctions linked to Russia's war in Ukraine.
Traders said the biggest uncertainty for the market remains when Freeport LNG will restart its LNG export plant in Texas.
Small amounts of gas started to flow to Freeport on Dec. 20 for the first time since August and continued to flow on Dec. 21, according to data provider Refinitiv, prompting some in the market to wonder whether the plant was close to restarting.
A source familiar with the matter said Freeport was using the gas to maintain a flare system at the plant.
After several delays - from October to November to December - the company has said several times this month, including on Dec. 20, that the plant is on track to restart by the end of the year, pending regulatory approval.
Many analysts, however, do not expect Freeport to return until the first quarter of 2023 because the company still has a lot of work to do to satisfy federal regulators.
Whenever Freeport returns, U.S. demand for gas will jump. The plant can turn about 2.1Bcf/d of gas into LNG for export, which is about 2% of U.S. daily production.
Freeport shut on June 8 after a pipe failure caused an explosion due to inadequate operating and testing procedures, human error and fatigue, according to a report by consultants hired to review the incident and suggest action.
A couple of vessels - Prism Diversity and Prism Courage - have been waiting in the Gulf of Mexico to pick up LNG from Freeport since at least early November.
Several other ships were also sailing toward the plant, including Elisa Larus, which is expected to arrive in late December, Prism Agility (early January), Kmarin Diamond (mid January) and Wilforce (late January). Point Fortin, which was heading toward Freeport, is now on track to go to Cheniere Energy Inc.'s Corpus Christi plant in Texas.
Even without Freeport, the amount of gas flowing to U.S. LNG export plants hit 13.1 Bcf/d last week, the most since May 28 - 11 days before Freeport shut. That is because the nation's six other big export plants were operating near full capacity.
After weeks of extreme volatility, front-month gas futures rose 0.6 cent, or 0.1%, to settle at $5.332/MMBtu. On Dec. 20, the contract fell 9% to settle at its lowest since Oct. 27.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states eased to 99.4 Bcf/d so far in December, down from a monthly record of 99.5 Bcf/d in November.
On a daily basis, output was on track to drop about 3.4 Bcf/d over the past nine days to a preliminary two-month low of 97.2 Bcf/d on Dec. 21 as freezing weather covers much of the country, causing well freeze-offs in Texas, Oklahoma, North Dakota and Pennsylvania.
Recommended Reading
President: Financial Debt for Mexico's Pemex Totaled $106.8B End of 2023
2024-02-21 - President Andres Manuel Lopez Obrador revealed the debt data in a chart from a presentation on Pemex at a government press conference.
Some Payne, But Mostly Gain for H&P in Q4 2023
2024-01-31 - Helmerich & Payne’s revenue grew internationally and in North America but declined in the Gulf of Mexico compared to the previous quarter.
Kimmeridge Fast Forwards on SilverBow with Takeover Bid
2024-03-13 - Investment firm Kimmeridge Energy Management, which first asked for additional SilverBow Resources board seats, has followed up with a buyout offer. A deal would make a nearly 1 Bcfe/d Eagle Ford pureplay.
M4E Lithium Closes Funding for Brazilian Lithium Exploration
2024-03-15 - M4E’s financing package includes an equity investment, a royalty purchase and an option for a strategic offtake agreement.
Laredo Oil Subsidiary, Erehwon Enter Into Drilling Agreement with Texakoma
2024-03-14 - The agreement with Lustre Oil and Erehwon Oil & Gas would allow Texakoma to participate in the development of 7,375 net acres of mineral rights in Valley County, Montana.