US natural gas prices climb 5% on return of Freeport LNG, lower output

By Scott DiSavino

U.S. natural gas futures climbed about 5% on Wednesday on a drop in output and forecasts for demand to rise more than previously expected this week, especially with the return to service of Freeport LNG's export plant in Texas from an outage a day earlier.

Gas futures NG1! for June delivery on the New York Mercantile Exchange rose 15.8 cents, or 4.6%, to settle at $3.621 per million British thermal units.

Analysts said mild weather expected to last through late May should keep heating and cooling demand low, allowing utilities to continue injecting more gas into storage than normal for this time of year.

Gas stockpiles are currently around 1% above the five-year normal.

Inventories had been below normal from mid-January through late April after utilities pulled a monthly record of 1.013 billion cubic feet of gas from storage in January to keep homes and businesses warm during extreme cold weather this winter.

Some analysts said mild weather and record output this spring could allow energy firms to add record amounts of gas into storage in May. The current all-time monthly injection high of 494 bcf was set in May 2015.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 U.S. states has fallen to 103.4 billion cubic feet per day so far in May, down from a monthly record of 105.8 bcfd in April.

Since gas output hit a daily record high of 107.4 bcfd on April 18, production was on track to drop by around 5.5 bcfd to a preliminary 10-week low of 102.6 bcfd on Tuesday. Analysts have noted that preliminary data is often revised later in the day.

Meteorologists projected temperatures in the Lower 48 states would remain mostly warmer than normal through May 22.

LSEG forecast average gas demand in the Lower 48, including exports, will slide from 96.7 bcfd this week to 94.2 bcfd next week. The forecast for this week was higher than LSEG's outlook on Tuesday, while its forecast for next week was lower.

The average amount of gas flowing to the eight big LNG export plants operating in the U.S. has fallen to 14.8 bcfd so far in May, down from a monthly record of 16.0 bcfd in April.

On a daily basis, the shutdown of Freeport, which was due to a power interruption, and reductions at other plants caused LNG feedgas to drop to a 14-week low of 12.4 bcfd on Tuesday.

LSEG said the amount of gas flowing to Freeport's 2.1-bcfd plant was on track to reach 1.8 bcfd on Wednesday, up from 0.3 bcfd on Tuesday and an average of 1.9 bcfd over the prior seven days.

The other LNG feedgas reductions were at Cameron LNG's 2.0-bcfd plant in Louisiana and Cheniere Energy's LNG 3.9-bcfd Corpus Christi plant under construction and in operation in Texas.

Gas flows to Cameron have held around 1.2 bcfd since Monday, down from an average of 1.8 bcfd over the prior seven days, while flows to Corpus have held around 1.5 bcfd since Tuesday, down from an average of 2.2 bcfd over the prior seven days.

Officials at Cameron LNG have not commented on the feedgas reduction, while officials at Cheniere said they had no comment. Both companies, however, have told customers in separate postings that they were conducting maintenance on pipelines and other equipment that supplies gas to their plants.

Energy traders noted that other than the Freeport shutdown, most of the feedgas reductions and pipeline work were part of normal spring and autumn maintenance when demand for gas for heating and cooling is low.

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