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U.S. natgas plunge 17% as Freeport LNG outage leaves more fuel for storage


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U.S. natural gas futures plunged about 17% on Thursday to a three-month low as the

shutdown of Freeport LNG’s liquefied natural gas (LNG) export plant in Texas allowed utilities to stockpile

more fuel than expected even as hotter weather had generators burning more gas to keep air conditioners

humming.

The market extended earlier storage-related losses of around 9% after U.S. pipeline safety regulators said

they found unsafe conditions at Freeport and that they will not allow the plant to restart until an outside

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analysis is complete.

Freeport, the second-biggest U.S. LNG export plant, was consuming about 2 billion cubic feet per day

(bcfd) of gas before it shut on June 8, so the expected 90-day outage would leave around 180 billion cubic

feet (bcf) of gas available to the U.S. market.

The U.S. Energy Information Administration (EIA) said utilities added 82 bcf of gas to storage during the

week ended June 24, exceeding the 74-bcf build analysts forecast in a Reuters poll and increases of 73 bcf in

the same week last year and a five-year (2017-2021) average increase of 73 bcf.

“To come in 9 bcf above the five-year average injection, in what was another notably hot week for June,

was no small feat and was a direct result of Freeport LNG’s outage, healthy renewable generation and

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stealthily increasing supply last week,” analysts at Gelber & Associates said in a note.

Front-month gas futures for August delivery fell $1.074, or 16.5%, to settle at $5.424 per million

British thermal units (mmBtu), their lowest close since March 29. That was the biggest one-day percentage

decline since late January when prices fell about 26%.

For the month, the contract fell about 33% in June, its biggest monthly decline since dropping 36% in

December 2018.

That also put the contract down about 4% for the second quarter after rising about 51% during the first

quarter as much higher prices in Europe and Asia fed strong demand for U.S. LNG exports. Russia’s Feb. 24

invasion of Ukraine stoked fears Moscow would cut gas supplies to Europe.

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Gas was trading around $46 per mmBtu in Europe and $39 in Asia.

Russia’s pipeline gas exports dropped to just 2.0 bcfd on Wednesday from 3.7 bcfd on Tuesday on the three

main lines into Germany – Nord Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany) and the

Russia-Ukraine-Slovakia-Czech Republic-Germany route.

That is down from around 6.5 bcfd in mid June and an average of 11.6 bcfd in June 2021.

U.S. futures lag far behind global prices because the United States is the world’s top producer, with all

the gas it needs for domestic use, while capacity constraints limit LNG exports.

Data provider Refinitiv said average gas output in the U.S. Lower 48 states slid to 95.1 bcfd so far in

June from 95.2 bcfd in May and a monthly record of 96.1 bcfd in December 2021.

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Daily U.S. gas output was on track to drop 2.4 bcfd over the past four days to a preliminary nine-week low

of 93.9 bcfd after hitting a six-month high of 96.2 bcfd on Sunday. Preliminary data is often revised later in

the day.

With hotter weather coming, Refinitiv projected average U.S. gas demand including exports would rise from

94.1 bcfd this week to 95.3 bcfd next week. The forecast for next week was lower than Refinitiv’s outlook on

Wednesday.

The average amount of gas flowing to U.S. LNG export plants dropped to 11.1 bcfd so far in June due to the

Freeport outage from 12.5 bcfd in May and a record 12.9 bcfd in March. The seven big U.S. export plants can

turn about 13.6 bcfd of gas into LNG.

Week ended Week ended Year ago Five-year

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June 24 June 17 June 24 average

(Actual) (Actual) June 24

U.S. weekly natgas storage change (bcf): +82 +74 +73 +73

U.S. total natgas in storage (bcf): 2,251 2,169 2,547 2,573

U.S. total storage versus 5-year average -12.5% -13.2%

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

Last Year Average Average

2021 (2017-2021)

Henry Hub 6.44 6.50 3.27 3.73 2.89

Title Transfer Facility (TTF) 44.35 41.84 10.27 16.04 7.49

Japan Korea Marker (JKM) 37.16 37.00 11.58 18.00 8.95

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 6 5 2 5 5

U.S. GFS CDDs 236 230 202 197 193

U.S. GFS TDDs 242 235 204 202 198

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Refinitiv U.S. Weekly GFS Supply and Demand Forecasts

Prior Week Current Week Next Week This Week Five-Year

Last Year Average For

Month

U.S. Supply (bcfd)

U.S. Lower 48 Dry Production 95.2 95.4 95.8 91.0 84.6

U.S. Imports from Canada 7.7 7.8 7.8 8.0 7.7

U.S. LNG Imports 0.0 0.0 0.0 0.0 0.1

Total U.S. Supply 102.9 103.2 103.6 99.0 92.4

U.S. Demand (bcfd)

U.S. Exports to Canada 2.3 2.2 2.2 2.3 2.2

U.S. Exports to Mexico 6.0 5.9 6.1 6.5 5.1

U.S. LNG Exports 10.6 10.5 10.5 11.1 4.3

U.S. Commercial 4.4 4.4 4.3 4.3 4.7

U.S. Residential 3.7 3.5 3.6 3.5 4.3

U.S. Power Plant 37.9 39.7 40.7 39.5 32.8

U.S. Industrial 21.0 21.0 20.9 20.8 20.9

U.S. Plant Fuel 4.7 4.7 4.7 4.7 4.7

U.S. Pipe Distribution 2.0 2.0 2.0 2.0 1.8

U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1

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Total U.S. Consumption 73.8 75.4 76.5 74.9 69.3

Total U.S. Demand 92.7 94.1 95.3 94.8 80.9

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

Week ended Week ended Week ended Week ended Week ended

Jul 1 Jun 24 Jun 17 Jun 10 Jun 3

Wind 12 8 12

Solar 3 5 4

Hydro 7 7 7

Other 2 2 2

Petroleum 0 0 0

Natural Gas 38 41 36

Coal 20 20 19

Nuclear 17 19 19

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

Hub Current Day Prior Day

Henry Hub 6.69 6.66

Transco Z6 New York 6.50 6.14

PG&E Citygate 7.79 7.95

Dominion South 6.21 5.85

Chicago Citygate 6.51 6.49

Algonquin Citygate 7.52 6.25

SoCal Citygate 7.20 7.25

Waha Hub 6.20 6.25

AECO 4.87 4.91

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

Hub Current Day

New England 76.75 72.50

PJM West 113.75 100.25

Ercot North 83.00 76.25

Mid C 73.25 79.25

Palo Verde 64.50 65.25

SP-15 62.75 66.50

(Reporting by Scott DiSavino; Editing by Jan Harvey, David Gregorio and Richard Chang)

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