Mild weather and outage at LNG export facility pressure prices for the heating fuel

Bank predicts $4.50 gas next year, possibly drop below $4

By Ryan Dezember

Updated Dec. 6, 2022 at 8:25 am ET

U.S. natural-gas futures have shed 24% since Thanksgiving, including an 11% drop on Monday, at a time of year when prices for the heating and power-generation fuel usually rise with demand to warm businesses and homes.

Monday’s big move was the 39th time this year that prices rose or fell at least 7% in a day, the most in data going back to 1992, according to Dow Jones Market Data. Futures trading launched in 1990 following the deregulation of natural-gas markets.

Futures for January delivery settled Monday at $5.577 per million British thermal units. That is more than 50% higher than a year ago, but down more than $4 from the highs reached this summer when inventories were alarmingly low and surging energy costs helped drive inflation to the highest levels in decades. 

Since then, domestic drillers have notched daily output records, heating season was delayed by mild weather and a lot of gas that would have otherwise been liquefied and shipped abroad via a fire-damaged LNG export terminal was socked away for winter instead. 

The U.S. gas-inventory deficit last week was 2.4% below normal levels for this time of year, compared with a double-digit deficit earlier this year that lingered into September. Forecasts for warmer weather in December have analysts penciling in a surplus to the five-year average by the middle of the month. 

“We have plenty of gas and prices are going to roll down,” said Francisco Blanch, a commodity and derivative strategist at BofA Securities. 

The bank expects natural-gas prices to average $4.50 per million British thermal units next year, and possibly drop below $4, where they spent much of the previous decade thanks to the shale-drilling boom that flooded the market with fuel.

TPH & Co. predicts robust supply will outstrip demand and send gas prices down toward $3 in the second half of next year. That outlook prompted the energy-focused investment bank to downgrade shares of gas producers Antero Resources Corp., EQT Corp. and Coterra Energy Inc. to hold from buy. 

Those companies have been some of the market’s top performers this year—up 82%, 70% and 38%, respectively. Lower gas prices would come at their expense. But cheaper fuel would improve manufacturers’ margins and leave more money in the pockets of American consumers, who are shouldering a greater share of heating and power expenses than they did before the work-from-home era. 

Predictions for cheaper gas next year don’t rule out the potential for big swings before then. Spikes are still possible if temperatures plunge. Meanwhile, the gas market has been whipsawed by the situation on a Texas barrier island where Freeport LNG’s export facility has been shut down since a fire in June. 

The facility is one of the country’s largest, with capacity to export enough gas each day to power metropolitan San Antonio. Every day since the fire, that much gas has backed up into the domestic market, helping to ease supply worries and push down prices. 

The latest leg down in price has coincided with Freeport’s extending its timeline to resume exports. Freeport received permission from regulators to begin certain repairs last week and aims to resume operations around the end of the year instead of the middle of this month, spokeswoman Heather Browne said.

Write to Ryan Dezember at ryan.dezember@wsj.com

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Thanks, John.  You'll go crazy following daily "futures" prices.  A short warm spell this time of year, they dip.  A blue northern comes along, the go up.  Futures prices are highly volatile over relatively short periods of time.  And futures are "paper trades".  Physical volumes of gas are sold on the monthly settlement price and on the daily spot price for those users who expend their physical volumes before the month ends.  I suspect that when the injection season rolls around in the spring, we will see lower prices but there are a lot of days from now to then and many things can impact the market.  A 2023 average monthly settlement in the $4.50 to $4 range will make all natural gas focused companies profitable and continue the pace of development.  The next major correction after the Ukraine war plays out is the coming wave of new LNG export volumes.  Those new facilities are a couple of years off.

By "next major correction" due to LNG export volumes I presume you mean an upward trend in prices. With many countries around the globe scrambling to secure future LNG shipments going forward, I would suspect much of the domestic glut we are starting to see now will evaporate as this excess capacity makes its way to higher priced foreign markets. Can't help but keep upward pressure on US nat gas prices.

Yes, a plateau in NG prices for about two years with an associated  slow down in pace of development.  The HH forward strip, which is of course an educated guess, shows an monthly average of ~$5 for 2023.  As new export capacity comes on line, drilling should pick up and the price will get support based on demand at that time.  This is all based on timing and for the scenario to play out, new LNG plants will need to begin construction in the first half of 2023.  We'll see how that plays out.

This is from July of this year.  I haven't found a similar article more up to date.  Use the link at the bottom of this reply for the full article.

LNG Project Tracker: Contracting surge accelerates next cycle of export projects

A wave of recent contracting announcements has kicked off the next cycle of building multibillion-dollar U.S. liquefied natural gas export facilities. The surge shows little sign of slowing in the second half, as two projects advanced to construction on the Gulf Coast.

The country's largest LNG exporter, Cheniere Energy Inc., commercially sanctioned a midscale expansion of its Corpus Christi LNG terminal in late June that will add roughly 10 million tonnes per year of LNG production capacity to the Texas facility.

Weeks earlier, Venture Global LNG made a final investment decision to build its second U.S. LNG export facility — the 20-Mt/y Plaquemines LNG project in Louisiana. These projects alone reflect a major buildout of U.S. export capacity, adding up to roughly a third of the existing U.S. capacity. But sector experts widely believe that these will not be the last U.S. LNG projects that advance to construction over the next year.

The question is who will be next among the backers of a dozen or so other projects trying to build sufficient commercial support to secure financing.

"You are still in an environment where you can get things done — it's constructive, but it's competitive," said Michael Webber, an independent LNG analyst and managing partner of investment research firm Webber Research & Advisory. "A lot of these will have to stick around for the next cycle."

Cheniere and Venture Global secured long-term contracts to advance to construction as surging natural gas prices abroad spurred increasing buyer demand for American gas supplies, especially as the war in Ukraine raised fears of supply disruptions. Several other U.S. LNG developers also benefited from the high volume of commercial activity in 2022. More than 33 Mt/y worth of binding long-term agreements tied to U.S. LNG projects have been signed since Russia invaded Ukraine on Feb. 24. U.S. developers have secured about another 13 Mt/y worth of preliminary deals in 2022.

The invasion prompted a scramble by European buyers to shore up new LNG volumes. High prices and security supply concerns also spurred other buyers to commit to new long-term supplies in 2022, including volumes from proposed U.S. projects that investors had considered dead just a year earlier. Customers in Asia and large portfolio traders have accounted for most of the contracting activity with U.S. developers year-to-date.

Webber's research firm expects that two or three additional U.S. projects have a good chance of getting commercially sanctioned during this construction cycle. But the firm has also cautioned about emerging construction risks because of factors such as inflationary pressures on global supply chains and a potential contractor crunch.

S&P Global Commodity Insights analysts recently predicted that U.S. LNG export capacity will reach 21.7 Bcf/d by the end of 2027, an 84% increase from existing levels. How quickly new projects can come online will be a key issue for a global gas market facing a supply shortfall headed into the mid-2020s.

An early June fire at the Freeport LNG Development LP export terminal in Texas highlighted the fragile state of global gas supply and jolted market participants. U.S. LNG exports had averaged about 12.5 Bcf/d before the Freeport shutdown but will likely average closer to 11 Bcf/d as long as the facility is offline.

https://www.spglobal.com/marketintelligence/en/news-insights/latest...

So, are the LNG export facilities running at full volume?  Is Europe full up on NG already?

Freeport LNG is still off line but should resume operations around the end of this month.  European natural gas storage was 91.3% of capacity three days ago. 

https://www.reuters.com/graphics/UKRAINE-CRISIS/EUROPE-GAS/zdvxozxz...

It wasn't long ago that there were LNG carriers anchored off the coast where storage facilities are located.  They had to wait days or weeks to unload.

Harsh Weather May Delay Germany’s Plans for First LNG Terminals

By Vanessa Dezem (Bloomberg) Germany’s plans to start imports of liquefied natural gas this month are at risk of being derailed by the weather.

Strong wind, freezing temperatures, high waves — or a combination — have already interrupted some works on its first terminals, and could delay some of the projects due to launch by the end of the year. 

Three import sites whose works are more advanced are expected to add capacity for some 20 billion cubic meters per year of LNG — equivalent to more than 40% of the Russian gas that Germany imported in 2021. The longer these facilities take to become operational, the more exposed Germany will be in winter, when heating demand grows and extra supplies become necessary.

“There is one factor that is simply unpredictable for us now: the weather. That could be the key driver for a possible delay,” Uniper Chief Executive Officer Klaus-Dieter Maubach said this week, whose company is building an LNG terminal in the northwestern port of Wilhelmshaven. “But we are still confident that we can finish the construction of the project this year.”

Germany has rushed to build infrastructure to import more LNG and slash its dependence on Russian pipeline gas amid an unprecedented energy crunch. The government passed a law to accelerate the projects’ approval times and spent billions to charter import facilities. Companies have agreed with Berlin to arrange temporary supplies that will go through the new terminals.


LNG has been essential for Europe to fill gas storage sites and prepare for the winter. The continued arrival of cargoes from as far away as the US or Qatar at existing ports in Europe has driven gas prices down. But contracts are still four times higher than the average of the last five years and the terminals are congested, with the new German facilities expected to ease the strains. 

However, unseasonably cold temperatures are expected across Germany in the next two weeks, weather forecasts show, and risk creating new challenges for the projects’ development.

The privately-run facility in Lubmin already faced delays due to harsh weather, according to its operator. While a floating terminal known as Neptune has recently reached the port of Mukran in Germany, taking it to its final destination in Lubmin will depend on the weather improving. 

“The weather always plays a not insignificant role in an offshore project – especially during winter,” said Stephan Knabe, Chairman of the Supervisory Board of operator Deutsche ReGas GmbH & Co. KGaA. “This means that if the wind is too strong and the waves are too high, works on the ship — even in the port of Mukran — cannot be carried out and Neptune cannot be transferred to the port of destination in Lubmin either.”

The project — with capacity of 5.2 billion cubic meters — was first planned to start in the beginning of December. The necessary components and all the infrastructure requirements are now ready, but Deutsche ReGas says that “further delays cannot be ruled out.”

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