U.S. natural gas futures climbed about 2% to a five-week high on April 10 on an increase in feedgas to the Freeport LNG export plant and a drop in output as pipeline maintenance trapped gas in Texas. Producers have also continued to reduce drilling activities after prices collapsed to 3-1/2-year lows earlier this year.
Limiting price gains was the huge amount of surplus of gas in storage and negative spot power and gas prices in parts of Texas, California and Arizona seen over the past few weeks.
Front-month gas futures for May delivery on the New York Mercantile Exchange rose 4.4 cents, or 2.4%, to $1.916 per million British thermal units (MMBtu) at 9:39 a.m. EDT (1339 GMT), putting the contract on track for its highest close since March 6 for a second day in a row.
Analysts projected gas stockpiles were about 37% above normal levels for this time of year.
The U.S. Energy Information Administration (EIA) projected gas and power demand would both hit record highs in 2024, while gas output will drop for the first time since 2020 when COVID-19 pandemic lockdowns cut demand for the fuel. The EIA also projected that U.S. gas prices would be cheaper in 2024 than coal for the first time ever.
In the spot market, next-day gas prices at the Waha hub in the Permian Basin in West Texas fell from negative $1.20 on April 8 to negative $1.50 per mmBtu on April 9, their lowest since April 2020 for a second day in a row, according to data from SNL Energy on the LSEG terminal.
Over the past several weeks, daily power and gas prices in Texas, California and Arizona have traded below zero due to low demand, ample renewable sources of power and pipeline maintenance that trapped gas in Texas.
Supply and demand
Financial firm LSEG said gas output in the Lower 48 U.S. states fell to an average of 98.9 Bcf/d so far in April, down from 100.8 bcfd in March. That compares with a monthly record of 105.6 Bcf/d in December 2023.
On a daily basis, output was on track to drop by 3.9 Bcf/d over the past four days to a preliminary 12-week low of 96.1 Bcf/d on April 10. Energy traders have said preliminary data was often revised higher later in the day.
With warmer weather coming, LSEG forecast gas demand in the Lower 48, including exports, would fall from 100.9 bcfd this week to 96.4 bcfd next week. The forecast for next week was higher than LSEG's outlook on April 9.
Gas flows to the seven big U.S. LNG export plants slid to an average of 12.7 Bcf/d so far in April, down from 13.1 Bcf/d in March. That compares with a monthly record of 14.7 Bcf/d in December.
On a daily basis, LNG feedgas was on track to rise to a three-week high of 13.5 Bcf/d as the amount of gas flowing to Freeport climbs to 1.5 Bcf/d on April 10 from 1.1 Bcf/d on April 9 and an average of 0.8 Bcf/d over the prior seven days.
Analysts do not expect U.S. LNG feedgas to return to record levels until all three liquefaction trains at Freeport's plant in Texas return to service.
Freeport said in late March it expects Trains 1 and 2 to remain shut until May for inspections and repairs, while Train 3 was operating. Analysts, however, believe Freeport has already restarted at least one of the two trains shut for inspection and repairs. Each Freeport train can turn about 0.7 Bcf/d of gas into LNG.
Recommended Reading
U.S. Shale-catters to IPO Australian Shale Explorer on NYSE
2024-05-04 - Tamboran Resources Corp. is majority owned by Permian wildcatter Bryan Sheffield and chaired by Haynesville and Eagle Ford discovery co-leader Dick Stoneburner.
1Q24 Dividends Declared in the Week of April 29
2024-05-03 - With earnings season in full swing, upstream and midstream companies are declaring quarterly dividends. Here is a selection of dividends announced in the past week.
Analyst Questions Kimmeridge’s Character, Ben Dell Responds
2024-05-02 - The analyst said that “they don’t seem to be particularly good actors.” Ben Dell, Kimmeridge Energy Partners managing partner, told Hart Energy that “our reputation is unparalleled.”
Tellurian Reports Driftwood LNG Progress Amid Low NatGas Production
2024-05-02 - Tellurian’s Driftwood LNG received an extension through 2029 with authorization from the Federal Energy Regulatory Commission and the U.S. Army Corps of Engineers.
Zeta Energy Appoints Michael Everett as COO
2024-05-02 - Prior to joining Zeta Energy, a lithium-sulfur battery developer, Michael Everett previously served as president and COO at Advanced Battery Concepts.