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U.S. natgas succumbs to Freeport restart delay as demand outlook dims

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U.S. natural gas futures extended a sell-off and fell more than 10% on Monday as forecasts for milder

weather cast a shadow on demand outlook, hurt by the delayed restart of the Freeport liquefied natural gas

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(LNG) export plant.

Front-month gas futures for January delivery shed 70.4 cents, or 11.2%, to settle at $5.577 per

million British thermal units, having touched its lowest level since the end of October at $5.556.

“The big factor putting downward pressure on prices today is the weather revisions. With warmer weather

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in the near future, less gas will be consumed in the residential and commercial sector. Our demand models show

sharply lower demand for gas over the near-term,” said John Abeln, analyst with data provider Refinitiv.

Freeport LNG on Friday again delayed the restart of the second-biggest U.S. LNG export facility, moving its

forecast for resuming processing to year end, pending regulatory approval.

The delay is further curtailing gas demand from the export sector, energy consulting firm Ritterbusch and

Associates said in a note.

“With storage at around average levels, supplies appear adequate to meet requirements of a normal to

moderately colder-than-normal winter. And although cold temperatures in Europe have been boosting prices, any

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implied increase in U.S. exports appears to be a minor consideration for now.”

The Freeport plant, which can convert about 2.1 billion cubic feet per day (bcfd) of gas into LNG, shut on

June 8 due to an explosion caused by inadequate operating and testing procedures, human error and fatigue,

according to a report by consultants hired by the company to review the incident and propose corrective

actions.

“There is still plenty of winter left; a real cold snap in January or February has the potential to send

prices much higher. Also, if Freeport actually does start operations at the end of this year, that should send

a strong bullish signal to the market,” Abeln added.

Week ended Week ended Year ago Five-year

Dec 2 Nov 25 Dec 2 average

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(Forecast) (Actual) Dec 2

U.S. weekly natgas storage change (bcf): -40 -81 -59 -49

U.S. total natgas in storage (bcf): 3,443 3,483 3,513 3,520

U.S. total storage versus 5-year average -2.2% -2.4%

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

Current Day Prior Day Last Year Average Average

2021 (2017-2021)

Henry Hub 3.86 3.73 2.89

5.95 6.72

Title Transfer Facility (TTF) 37.67 16.04 7.49

44.32 42.27

Japan Korea Marker (JKM) 37.84 18.00 8.95

31.76 33.78

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

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

Prior Day Norm Norm

U.S. GFS HDDs

335 380

U.S. GFS CDDs 8 8

U.S. GFS TDDs

343 388

Refinitiv U.S. Weekly GFS Supply and Demand Forecasts

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Next Week This Week Five-Year

Prior Week Current Week Last Year Average For

Month

U.S. Supply (bcfd)

U.S. Lower 48 Dry Production 89.8

100.1 99.6

U.S. Imports from Canada 8.9

8.5 8.5

U.S. LNG Imports 0.3

0.0 0.0

Total U.S. Supply 99.0

108.6 108.1

U.S. Demand (bcfd)

U.S. Exports to Canada 3.2

3.4 3.3

U.S. Exports to Mexico 5.0

5.6 5.4

U.S. LNG Exports 6.9

11.8 12.2

U.S. Commercial 14.6

13.6 13.1

U.S. Residential 24.6

22.1 21.0

U.S. Power Plant 27.3

27.1 30.1

U.S. Industrial 24.9

24.3 23.9

U.S. Plant Fuel 4.9

4.9 4.9

U.S. Pipe Distribution 2.5

2.5 2.6

U.S. Vehicle Fuel 0.1

0.1 0.1

Total U.S. Consumption 98.9

94.7 96.0

Total U.S. Demand 114.0

115.7 116.9

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

Week ended Week ended Week ended Week ended Week ended

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Dec 2 Nov 25 Nov 18 Nov 11 Nov 4

Wind 14 9 9 15 12

Solar 2 2 3 3 3

Hydro 6 6 7 6 5

Other 2 2 2 3 2

Petroleum 0 0 0 0 0

Natural Gas 34 39 41 38 39

Coal 19 20 18 16 18

Nuclear 22 20 20 20 20

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

Hub Current Day Prior Day

Henry Hub

4.92 6.33

Transco Z6 New York

5.29 5.68

PG&E Citygate

15.33 19.64

Dominion South

4.45 5.20

Chicago Citygate

4.60 5.57

Algonquin Citygate

6.46 6.17

SoCal Citygate

17.28 19.05

Waha Hub

3.43 4.88

AECO

5.50 5.07

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

Hub Current Day Prior Day

New England

53.50 73.75

PJM West

47.50 56.50

Ercot North

45.00 38.25

Mid C

180.00 195.50

Palo Verde

138.75 150.25

SP-15

149.25 182.25

(Reporting by Ashitha Shivaprasad in Bengaluru; additional reporting by Swati Verma; Editing by Kirsten

Donovan and Jonathan Oatis)

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