U.S. natgas futures rise 2% on forecasts for more LNG exports in January

(Reuters) - U.S. natural gas futures rose about 2% on Wednesday from a 10-month low in the prior session on forecasts for higher demand for LNG exports over the next two weeks than previously expected.

Traders said the biggest uncertainty for the market remains when Freeport LNG will restart its LNG export plant in Texas. After several delays from October to November and then to December, Freeport now expects the facility to return in the second half of January, pending regulatory approvals.

That is in line with what many analysts have long been saying - that Freeport would likely return during the first quarter of 2023 because the company still has a lot of work to do to satisfy federal regulators before restarting the plant. Whenever Freeport returns, U.S. demand for gas will jump. The plant can turn about 2.1 bcfd of gas into LNG, which is about 2% of U.S. daily production.

Freeport shut on June 8 after a pipe failure caused an explosion due to inadequate operating and testing procedures, and human error and fatigue, according to a report by consultants hired to review the incident and suggest corrective actions. Several vessels, including Prism Diversity, Prism Courage, Prism Agility and Elisa Larus, have been waiting in the Gulf of Mexico to pick up LNG from Freeport, some since early November.

Other ships were sailing toward the plant, including Corcovado LNG, which is expected to arrive in mid January, and Kmarin Diamond and Wilforce expected in late January. In other LNG news, the Cadiz Knutsen was expected to arrive at Constellation Energy Corp's Everett LNG terminal in Massachusetts in a few days with a third cargo of the super-cooled fuel from Trinidad this winter.

Cadiz Knutsen also delivered LNG to Everett in November and December. But with Everett competing with European buyers willing to pay around $21 per million British thermal units (mmBtu) for gas versus just $4 in the United States, the Massachusetts port imported just 19.7 billion cubic feet (bcf) of gas as LNG in 2022, according to Refinitiv data. That is down from 21.4 bcf in 2021 and a five-year (2017-2021) average of 40.2 bcf, according to federal energy data.

New England depends on LNG and oil to fuel some power plants on the coldest days when most of the region's pipeline gas is used to heat homes and businesses. About half of the power generated in New England comes from gas-fired plants. Front-month gas futures for February delivery rose 6 cents, or 1.5%, to $4.048 per mmBtu at 8:34 a.m. EST (1334 GMT).

On Tuesday, the contract settled at its lowest since Feb. 11. Despite the price rise, the front-month was still on track to remain in technically oversold territory with a relative strength index (RSI) below 30 for a fifth day in a row for the first time since October. Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 98.3 bcfd so far in January, up from 96.7 bcfd in December but still below the monthly record of 99.9 bcfd in November 2022.

Even though the weather is expected to remain warmer-than-normal through mid-January, Refinitiv projected average U.S. gas demand, including exports, would jump from 110.5 bcfd this week to 121.5 bcfd next week as LNG export rise and temperatures ease ahead of what are usually the coldest weeks of the year.

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