U.S. natgas jumps 5% as partial return of Freeport LNG boosts exports

U.S. natural gas futures jumped about 5% on Tuesday on a rapid increase in LNG exports following the partial return of Freeport LNG's export plant in Texas.

Prices also gained support from a decline in gas output this month and forecasts for colder weather and more heating demand next week than previously expected. Front-month gas futures for March delivery were up 11.7 cents, or 4.9%, to $2.522 per million British thermal units (MMBtu) at 8:37 a.m. EST (1337 GMT).

On Monday, the contract fell to within one cent of closing at the 25-month low hit on Feb. 8. The amount of gas flowing to U.S. LNG export plants was on track to reach 13.5 billion cubic feet per day (bcfd) on Tuesday, the highest since March 2022, as Freeport LNG's export plant in Texas pulled in more gas as it prepares to exit an eight-month outage caused by a fire in June 2022, according to data provider Refinitiv.

Freeport LNG, the second-biggest U.S. LNG export plant, was on track to pull in 0.7 bcfd of feedgas on Tuesday, up from 0.5 bcfd on Monday, according to Refinitiv. On Monday, Freeport LNG asked federal regulators for permission to put what the company called Phase 1 of its restart plan into commercial operation. Phase 1 includes the full operation of the plant's three liquefaction trains, which turn gas into LNG, two storage tanks and one LNG loading dock. Most of the gas going to Freeport LNG was being used in liquefaction Train 3, which started operating in test mode over the weekend.

When operating at full power, Freeport LNG can turn about 2.1 bcfd of gas into LNG for export. Energy regulators and analysts, however, have said they do not expect Freeport LNG to return to full commercial operation until mid-March or later. A couple of Freeport LNG's customers - Japan's JERA and Osaka Gas - have said they do not expect to get LNG from the plant until after March. U.S. GAS OUTPUT Refinitiv said average gas output in the U.S. Lower 48 states has fallen from 98.3 bcfd in January to 97.0 bcfd so far in February, after extreme cold earlier in the month froze oil and gas wells in several producing basins.

That compared with a monthly record of 99.8 bcfd in November 2022. Meteorologists forecast the weather would remain mostly warmer than normal through March 1 except for some cold days around Feb. 17-18 and Feb. 23-25. With three cold days expected next week versus just two this week, Refinitiv forecast U.S. gas demand, including exports, would rise from 118.3 bcfd this week to 123.2 bcfd next week.

The forecast for this week was lower than Refinitiv's outlook on Monday, while its forecast for next week was higher. With the amount of gas flowing to Freeport LNG rising, the average amount of feedgas going to all seven big U.S. LNG export plants has climbed to 12.8 bcfd so far in February from 12.3 bcfd in January. That compares with a monthly record of 12.9 bcfd in March 2022 before Freeport LNG shut.

The seven big U.S. export plants, including Freeport LNG, can turn about 13.8 bcfd of gas into LNG. The United States is on track to become the world's biggest LNG supplier in 2023 once Freeport LNG returns - ahead of current leader Australia - as much higher global prices feed demand for U.S. exports due to supply disruptions and sanctions linked to Russia's war in Ukraine. Gas was trading at $17 per mmBtu at the Dutch Title Transfer Facility (TTF) in Europe and $18 at the Japan Korea Marker (JKM) in Asia.

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