With the market continuing to assess the potential demand destruction from an explosion at a major U.S. export terminal, natural gas futures continued to tumble in early trading Thursday. 

NGI Morning Natural Gas Price & Markets Coverage

The July Nymex contract was down 34.4 cents to $8.355/MMBtu as of around 8:50 a.m. ET.

The July contract had advanced beyond the $9.60 mark Wednesday before midday reports of an explosion at the 2 Bcf/d Freeport liquefied natural gas (LNG) export terminal on the Texas coast. 

News of the explosion prompted a swift retreat amid questions surrounding how much demand could get knocked offline. The prompt month dropped as low as $8.095 in after hours trading.

“Following the early sell-off, Freeport LNG confirmed yesterday evening that the facility would be offline for a minimum of three weeks, further pressuring prices after the close,” analysts at Tudor, Pickering, Holt & Co. (TPH) said. 

Whether the facility remains offline beyond the three-week window will determine whether the recent sell-off is “overdone or undercooked.” A 2 Bcf/d outage over a three-week period would amount to 40-45 Bcf added to balances, suggesting the market is pricing in the risk of an extended outage, according to the TPH analysts.

The front month was able to regain a key technical support target around $8.21 in early trading Thursday, EBW Analytics Group senior analyst Eli Rubin observed.

Still, “an inability to hold support could open the door to another 50-cent loss,” Rubin said. “Aside from the expected day/day declines in LNG feed gas demand, daily dry gas production estimates have been revised higher, while forecast heat continues to rise for mid-to-late June. Emerging news concerning the potential duration of the Freeport outages, however, will be the dominant market risk in the days ahead.”

Meanwhile, the market will also have to factor in the latest Energy Information Administration storage report when it releases at 10:30 a.m. ET. Estimates have been pointing to a build approaching triple digits for the week ended June 3. 

The median of 12 estimates submitted to Bloomberg as of early Thursday was a 98 Bcf injection, with build estimates ranging from 85 Bcf to 104 Bcf. Reuters polled 14 analysts, whose estimates were as high as 109 Bcf. That poll showed a median increase of 94 Bcf. A Wall Street Journal poll produced an average build of 97 Bcf.