U.S. natgas falls 4% to 18-month low on rising output, low demand

U.S. natgas falls 4% to 18-month low on rising output, low demand

13 Jan    Finance News, PMN Business, REU

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U.S. natural gas futures fell about 4% to an 18-month low on Friday on rising output

and forecasts for heating demand to remain low and the weather to stay warmer-than-normal for another week,

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allowing utilities to leave more gas in storage.

Front-month gas futures for February delivery on the New York Mercantile Exchange fell 13.9 cents,

or 3.8%, to $3.556 per million British thermal units at 12:08 p.m. EST (1708 GMT), putting the contract on

track for its lowest close since June 25, 2021.

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That kept the front-month in technically oversold territory with a relative strength index (RSI) below 30

for a fourth day in a row and an 11th time in the last 12 days.

For the week, the contract was down about 4%, putting it down for a fourth week in a row for the first time

since October. During the prior three weeks, the contract lost 44%.

The premium on March futures over April , which the industry calls the widow maker, slid to a

record low of 4 cents per mmBtu as some market participants give up hope that extreme cold will bring a price

spike later this winter.

The industry uses the March-April spread to bet on the winter heating season when demand for gas peaks. It

calls the spread the “widow maker” because rapid price moves resulting from changing weather forecasts have

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forced some speculators out of business. Among them was the Amaranth hedge fund, which lost more than $6

billion on gas futures in 2006.

Traders said the biggest market uncertainty remains the restart date for Freeport LNG’s export plant in

Texas.

At least two LNG vessels gave up on Freeport this week after sources said the company would extend the

plant’s seven-month outage until February or later, ship tracking data from Refinitiv showed.

After several delays from October to November and then to December, Freeport said again this week that the

LNG plant was on track to return in the second half of January, pending regulatory approvals.

Despite Freeport’s sliding timeline, analysts have long said it would likely take until the first or second

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quarter of 2023 to restart the plant due to the large amount of work needed to satisfy federal regulators,

including training staff in new safety procedures.

Whenever Freeport returns, U.S. gas demand will jump. The plant can turn about 2.1 billion cubic feet per

day s(bcfd) of gas into LNG, which is about 2% of U.S. daily production.

Freeport has filed reports with federal regulators about what it is doing to return the plant but has kept

those filings confidential for competitive reasons.

A growing number of local and environmental groups have asked regulators in recent weeks to make those

filings public so they can comment on whether they think Freeport is doing enough to safely restart the plant.

Several vessels, including Prism Diversity, Prism Courage and Prism Agility, were waiting in the Gulf of

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Mexico to pick up LNG from Freeport. Some have been there since early November.

Other ships, meanwhile, were sailing toward Freeport, including Prism Brilliance, Kmarin Diamond and

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Wilforce, which are expected to reach the plant in late January.

U.S. GAS OUTPUT RISING

Data provider Refinitiv said that average gas output in the U.S. Lower 48 states has risen to 98.4 bcfd so

far in January, up from 96.7 bcfd in December. That compares with a monthly record of 99.9 bcfd in November

2022.

Refinitiv projected average U.S. gas demand, including exports, would ease from 120.8 bcfd this week to

119.7 bcfd next week as the weather turns milder before rising to 125.1 bcfd when the weather turns colder.

Year ago Five-year

Week ended Week ended Jan 13 average

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Jan 13 Jan 6 Jan 13

(Forecast) (Actual)

U.S. weekly natgas storage change (bcf): -156 -203

-74 +11

U.S. total natgas in storage (bcf): 2,828 2,839 2,786

2,902

U.S. total storage versus 5-year average +1.5%

-1.4%

Global Gas Benchmark Futures ($ per mmBtu) This Month Prior Year Five Year

Current Day Prior Day Last Year Average Average

2022 (2018-2022)

Henry Hub 4.26 6.54 3.60

3.56 3.70

Title Transfer Facility (TTF) 28.25 40.50 14.39

20.42 21.41

Japan Korea Marker (JKM) 28.53 34.11 14.31

26.76 26.87

Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days

Two-Week Total Forecast Current Day Prior Day Prior Year 10-Year 30-Year

Norm Norm

U.S. GFS HDDs

376 383 497 440 446

U.S. GFS CDDs 4 2

1 3 3

U.S. GFS TDDs

380 385 498 443 449

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Refinitiv U.S. Weekly GFS Supply and Demand Forecasts

Prior Week This Week Five-Year

Current Week Next Week Last Year Average For

Month

U.S. Supply (bcfd)

U.S. Lower 48 Dry Production 98.5 94.3 88.8

98.6 98.7

U.S. Imports from Canada 7.8 10.0 9.4

8.6 8.8

U.S. LNG Imports 0.0 0.1 0.4

0.0 0.0

Total U.S. Supply 106.3 104.4 98.6

107.2 107.5

U.S. Demand (bcfd)

U.S. Exports to Canada 3.2 2.8 2.8

2.7 2.8

U.S. Exports to Mexico 4.9 5.8 5.3

5.3 5.2

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U.S. LNG Exports 11.8 12.5 7.2

12.3 12.5

U.S. Commercial 12.6 18.1 17.1

14.7 14.5

U.S. Residential 20.0 30.3 29.8

23.6 23.7

U.S. Power Plant 27.3 29.2 28.5

29.6 28.9

U.S. Industrial 23.7 25.4 25.6

24.5 24.5

U.S. Plant Fuel 4.9 4.9 4.9

4.9 4.9

U.S. Pipe Distribution 2.4 2.7 2.4

2.7 2.6

U.S. Vehicle Fuel 0.1 0.1 0.1

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0.1 0.1

Total U.S. Consumption 91.1 110.7 108.4

100.4 99.2

Total U.S. Demand 111.0 131.8 123.7

120.8 119.7

U.S. weekly power generation percent by fuel – EIA

Week ended Week ended Week ended Week ended Week ended

Jan 13 Jan 6 Dec 30 Dec 23 Dec 16

Wind 10 12 11 9 12

Solar 2 2 2 2 2

Hydro 7 7 6 6 6

Other 2 2 2 2 2

Petroleum 0 0 0 0 0

Natural Gas 38 36 35 37 37

Coal 19 18 23 24 20

Nuclear 21 23 19 19 20

SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)

Hub

Current Day Prior Day

Henry Hub

3.47 3.41

Transco Z6 New York

3.15 2.70

PG&E Citygate

26.49 18.90

Dominion South

2.95 2.48

Chicago Citygate

3.50 3.15

Algonquin Citygate

3.67 3.42

SoCal Citygate

25.00 18.10

Waha Hub

2.89 2.35

AECO 2.85

3.06

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

Hub Current Day

Prior Day

New England 42.50

58.00

PJM West 47.25

38.00

Ercot North 34.00

27.50

Mid C

130.33

Palo Verde

137.25

SP-5

143.00

(Reporting by Scott DiSavino in New York and Rahul Paswan in Bengaluru;

Editing by Marguerita Choy)

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