NEW YORK: US natural gas futures tumbled more than 17% on Tuesday on news that the restart of the Freeport liquefied natural gas (LNG) export plant in Texas could take 90 days rather than the initial three-week estimate.
The delayed restart at one of the largest US export plants following an explosion last week would translate into much more gas being available in the United States, while exacerbating concerns over a shortage in Europe.
Front-month gas futures for July delivery on the New York Mercantile Exchange fell $1.37, or 16%, to $7.236 per million British thermal units at 10:01 a.m. EDT, wiping off small gains earlier in the session due to record power demand in Texas. Prices tumbled over 18% at one point to their lowest since May 10, at $7.041 an ounce.
European prices also spiked.
Power demand in Texas failed to hit a new all-time high on Monday due to less hot weather, but will likely break peak use records on Tuesday and later this week as homes and businesses keep air conditioners cranked up to escape a lingering heatwave.
US gas futures were up about 90% this year as much higher prices in Europe and Asia keep demand for US LNG exports strong, especially since Russia’s Feb. 24 invasion of Ukraine stoked fears Moscow might cut gas supplies to Europe.
US futures lag far behind global prices because the United States is the world’s top producer, with all the gas it needs for domestic use, while capacity constraints inhibit additional LNG exports.
Data provider Refinitiv said average gas output in the US Lower 48 states slid to 94.9 billion cubic feet per day (bcfd) so far in June from 95.1 bcfd in May. That compares with a monthly record of 96.1 bcfd in December 2021.
With hotter weather coming, Refinitiv projected average US gas demand, including exports, would rise from 93.6 bcfd this week to 94.1 bcfd next week. Those forecasts were higher than Refinitiv’s outlook on Monday.
The average amount of gas flowing to US LNG export plants fell from 12.5 bcfd in May to 11.8 bcfd so far in June, with the Freeport outage, according to data from Refinitiv. That compares with a monthly record of 12.9 bcfd in March. The seven big US export plants can turn about 13.6 bcfd of gas into LNG.
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