On Wednesday, U.S. natural gas futures fell by roughly 7% as a result of expectations for less chilly weather than had been anticipated in late December and after failing to overcome significant technical price resistance for the third straight day.
Meanwhile, as freezing weather and snowfall cover portions of California and gas pipeline failures and limits restrict supplies into the region, U.S. West Coast power and gas prices have almost tripled over the previous few weeks and were on track to record multiyear annual highs.
Even though production was on course to reach a two-month low due to extreme weather from North Dakota to Texas, futures prices dropped as some oil and gas wells froze. In the upcoming weeks, the cold weather should require utilities to draw more gas from storage than typical. Gas stockpiles were roughly 1.6% below the seasonal average for the previous five years (2017–2021).
The biggest question for the market, according to traders, is whether Freeport LNG will begin the export of liquefied natural gas (LNG) from its Texas facility at the end of the year. Once the facility, which can convert 2.1 billion cubic feet per day (bcfd) of gas into LNG, resumes operation, the demand for natural gas will increase.
But because it will probably take federal authorities longer than Freeport LNG anticipates to study and approve the plant’s restart plan once the firm files it, several analysts do not anticipate Freeport to return until January, February, or later.
This week, the firm was asked to comply with a long list of conditions by the U.S. Federal Energy Regulatory Commission (FERC), one of the federal agencies that must authorize Freeport’s restart. This put up further barriers in the way of the company’s attempts to begin operations.
On less frigid forecasts, what’s next for natural gas?
According to a report by consultants hired to investigate the incident. And recommend corrective measures. The Freeport plant shut down on June 8 as a result of an explosion brought on by insufficient operating and testing procedures, human error, and weariness.
Despite mounting expert predictions that Freeport won’t operate again until 2023. Two ships, Prism Diversity and Prism Courage, have been waiting in the Gulf of Mexico. To pick up LNG from the plant since at least early November.
Front-month gas futures ended the day at $6.430 per million British thermal units, down 50.5 cents or 7.3%. (mmBtu). For the third day in a row this week, the market made an attempt to push the contract over the 200-day moving average but was unsuccessful. Designating the average as a significant technical price resistance level. Despite the price drop, the natural gas futures have still increased by roughly 71%. So far this year as higher worldwide prices have fueled demand for American exports. As a result of supply interruptions and sanctions related to Russia’s war in Ukraine.
At the Dutch Title Transfer Facility (TTF) in Europe (TRNLTTFMc1) and the Japan Korea Marker (JKM) in Asia, gas was trading for $41 and $33, respectively, per mmBtu (JKMc1). Average gas output in the Lower 48 States of the United States has increased to 99.7 bcfd so far in December, up from a monthly record of 99.5 bcfd in November, according to data source Refinitiv.
On a daily basis, however, production was expected to decrease by 2.3 bcfd to a preliminary two-month low of 97.3 bcfd on Wednesday due to well freeze-offs brought on by frigid weather that has blanketed sections of Texas, Oklahoma, and North Dakota. The daily output would have decreased by the most since mid-October.