U.S. natural gas futures swung on Monday as the market continued to weigh conflicting information about when Freeport LNG might return to service.
While Henry Hub ultimately finished higher, a rally earlier in the day fizzled after Bloomberg cited anonymous sources who said the terminal would likely cancel shipments scheduled for November and December.
The contract seemed poised for a strong recovery from Friday’s losses, when unverified rumors on social media about further delays to Freeport’s restart stirred the market.
The liquefied natural gas operator responded last Friday to what it called “false information circulated today about the restart of Freeport LNG’s liquefaction facility.” Freeport said it had not made any public statements on the timing of its highly anticipated return to service.
The company warned that “any Tweets and/or posts on Freeport LNG-branded letterhead that may have been obtained or published, are reporting false information and are not legitimate.”
Freeport did not comment about the Bloomberg report. It continues to work toward a restart, but the mid-November timeline that it had previously targeted is clearly slipping away. The facility has not submitted a remedial work plan or a request to restart to federal regulators, which is required before operations can resume.
The outage has moved the U.S. and global gas markets since it began over the summer given the facility’s domestic demand and international supply impacts. The December Henry Hub contract finished 5.4 cents higher at $5.933/MMBtu on Monday.
Freeport has been offline since a June explosion near its storage tanks forced the plant to shut down. It has been targeting a mid-November start-up that calls for it ramping toward 2 Bcf/d of production, or about 85% of its capacity. Full service isn’t expected to resume until March, when a second loading dock returns to operations.
Cold On The Way
Colder weather that’s expected across much of the United States over the next six to 10 days helped push U.S. natural gas higher Monday. The same was true in Europe.
After nearly two weeks of storage injections on the continent amid unusually mild temperatures, colder air is finally forecast over the next two weeks. The benchmark Title Transfer Facility (TTF) contract jumped 16% Monday after a stretch of stability during the warmer weather. Storage inventories on the continent are near 96% of capacity.
Maintenance on the Interconnector UK pipeline, which links Britain and Belgium, is set to stop flows until the end of the month. Unplanned outages in Norway were also pushing TTF higher Monday as they’re expected to cut about 1.2 Bcf of deliveries until Tuesday, according to Schneider Electric.
LNG prices in North Asia remained low as the week got underway, with spot and futures prices both below $30/MMBtu. The Japan-Korea Marker is still about $6 below TTF.
China eased some Covid-19 measures last week, but most restrictions aimed at limiting the spread of the virus remain, which is likely to continue keeping a lid on energy consumption in the country, one of the world’s largest LNG buyers.
In that case, Europe would continue to benefit from the LNG China doesn’t purchase. The continent imported nearly 5 Tcf of LNG during the first 10 months of this year, up 40% from the same time in 2021, according to UK consultancy Timera Energy.
Once Asian buyers like China return to the market more aggressively, Europe could find it far more difficult to plug the supply gap that’s anticipated as Russian deliveries have declined throughout the year.
Timera noted that global LNG production volumes have been weak mainly due to upstream production constraints, maintenance and technical issues.
“As a result, most of the incremental LNG Europe has imported in 2022 is a function of high prices inducing demand destruction and fuel switching in Asia, not a supply-side production response,” the consultancy said in a note Monday.
European governments continue to quarrel over ways to mitigate high energy prices and replace Russian supplies. The European Commission told countries last week that it couldn’t implement a natural gas price cap given existing long-term supply contracts.
But European Union members including Belgium, Greece, Italy and Poland are reportedly demanding the price cap, which could threaten further measures to tackle the energy crisis that are expected to be decided on next week.
In a related move, Germany said Monday it would nationalize the former European trading and supply arm of Russia’s Gazprom PJSC. Germany, which nationalized utility Uniper SE in September, said it would increase a loan for Securing Energy for Europe GmbH to $14.3 billion. Formerly Gazprom Germania, the company was renamed over the summer after Germany took control of it.
Elsewhere, BP plc said it loaded the first cargo from the Coral-Sul floating LNG terminal offshore Mozambique. After a series of delays since September, when the first cargo was initially set to sail from the terminal, the British Sponsor is headed to Europe with the nation’s first LNG exports.
The facility has a production capacity of 3.4 million metric tons/year. BP is set to purchase all of its output under a 20-year agreement signed in 2016 with operator Eni SpA and its partners.
Eni CEO Claudio Descalz said the project’s first cargo is “a new and significant step forward in Eni’s strategy to leverage gas as a source that can contribute in a significant way to Europe’s energy security.”
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