NEW YORK: US natural gas futures climbed about 4% on Friday after the first vessel arrived at Freeport LNG’s liquefied natural gas (LNG) export plant in Texas since the facility shut in a fire in June 2022.
After federal regulators approved the cooldown of parts of Freeport and the return of ship loading at the plant in recent weeks, the arrival of the Kmarin Diamond LNG tanker was another sign that Freeport, the second biggest US LNG export plant, would likely start pulling in lots of gas to make LNG for export in coming weeks.
In addition to Freeport, gas prices also increased on rising LNG exports from other US facilities and revised forecasts for colder weather and higher heating demand in late February.
Meteorologists forecast the weather would remain mostly warmer than normal through Feb. 22 before turning colder than normal starting Feb. 24.
Energy analysts noted that colder than normal weather in late February does not boost heating demand by as much as cold in late January. The 30-year average temperature in the US Lower 48 states is about 37 degrees Fahrenheit (3 Celsius) on Jan. 25 versus 42 F on Feb. 25, according to data provider Refinitiv.
In recent weeks, Freeport said it would soon start sending gas to one of the plant’s three liquefaction trains, which turn gas into LNG. On Thursday, federal regulators gave the company permission to return ship loading to service to free up space in its storage tanks.
Many analysts, however, have long said they do not expect the plant to return to full capacity until mid-March or later.
A couple of Freeport’s customers - Japan’s JERA and Osaka Gas - have said they do not expect to get LNG from the plant until after March.
“If Freeport fully returns in March it could take the bearish risk off the table and potentially enable beaten down natural gas to establish a bottom,” analysts at energy consulting firm EBW Analytics said, noting they were still targeting the 30-45 day timeframe for a full restart of the plant.
Freeport has received an average of 35 million cubic feet of gas per day since Jan. 26 when federal regulators approved the company’s plan to start cooling parts of the plant. That is a fraction of the 2.1 billion cubic feet per day (bcfd) of gas Freeport can pull in when operating at full power.
Even though some vessels have turned away from Freeport in recent weeks, several tankers - including the Kmarin Diamond - have been waiting in the Gulf of Mexico for several weeks to pick up LNG from the plant.
Other vessels still waiting include Prism Agility (since Jan. 2), Prism Brilliance (Jan. 26), Nohshu Maru (Jan. 31) and Corcovado LNG (Feb. 10).
In addition, there are several vessels on their way to Freeport, including LNG Rosenrot (expected to arrive around Feb. 11), Seapeak Bahrain (Feb. 20), Gaslog Wales (Feb. 23), British Achiever (Feb. 24) and LNG Endurance (March 5).
Front-month gas futures rose 8.4 cents, or 3.5%, to settle at $2.514 per million British thermal units. Earlier this week, the contract closed at its lowest since December 2020.
For the week, the front-month gained about 4%, its first increase in eight weeks. Before this week’s gain, however, futures had collapsed by a record 64% over the past seven-week period.
With the amount of gas flowing to Freeport slowly rising in recent weeks, the average amount of feedgas going to US LNG export plants rose to 12.6 bcfd so far in February, up from 12.3 bcfd in January. That compares with the monthly record of 12.9 bcfd in March 2022 before Freeport shut.
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