Plant's Woes Send Gas Prices Diving

"U.S. natural-gas prices plummeted after a liquefied-natural-gas shipping facility in Texas said a fire last week would knock out the facility until late this year, greatly reducing export capacity.

Natural-gas futures for July delivery fell more than 16% to end Tuesday at $7.189 per million British thermal units, the latest whipsaw move in the market for the power-generation and heating fuel. Futures prices for deliveries through February shed at least 10% on the day, suggesting greatly diminished fears about shortages this coming winter.

Natural gas has been a big driver of inflation this year, with the highest prices in years adding to the cost of heating, cooling and powering homes and businesses as well as manufacturing steel, cement, glass, plastics and fertilizer. Prices had hit $9.60 just before the fire at the LNG plant on Wednesday, which was about triple what gas cost a year earlier. Since the fire, prices have dropped 25% from that intraday high.

Analysts have expected prices this summer to challenge records set before the shale-drilling boom flooded the U.S. market more than a decade ago. Exports of liquefied natural gas, or LNG, have boomed, especially to Europe, where buyers are racing to replace Russian fuel. Benchmark prices in Europe rose 16% on Tuesday at a Dutch trading hub.

The overseas demand has helped lift U.S. prices to their highest level in more than 10 years.

A fire last week at Freeport LNG's facility on a Texas barrier island has reduced U.S. export capacity by about one-sixth, or some 2 billion cubic feet a day, which is roughly enough gas to power 50,000 homes for a year.

U.S. manufacturers and consumer advocates have pointed to rising LNG exports as a big reason behind budget-busting energy costs at home. "It should be alarming to federal policy makers that the Freeport LNG terminal only exports 2 billion cubic feet a day, yet it is having such a significant impact to prices," said Paul Cicio, chief executive of Industrial Energy Consumers of America, a manufacturers' association.

Traders had been waiting on news about the extent of the damage. On Tuesday, the facility's closely held owner said that the fire, which broke out among the pipes that move LNG from storage tanks to docks, caused more damage than it initially thought.

"At this time, completion of all necessary repairs and a return to full plant operations is not expected until late 2022," Freeport said Tuesday. The firm said that it aimed for a partial restart in 90 days.

That means that a lot of shale gas that had been slated to be shipped abroad will now be available to traders to sock away in domestic storage facilities for winter when furnaces are fired up and demand is highest. U.S. natural-gas inventories are nearly 15% below the five-year average for this time of year, a result of record LNG exports as well as demand that has outpaced production.

The Freeport outage could go a long way toward erasing the deficit before winter, said Sheetal Nasta, analyst at consulting firm RBN Energy. "Capacity to move or displace that 2 billion cubic feet per day north and east is limited," she said. "Much of it is likely stranded in Texas and north Louisiana, and a lot of it could end up in storage."

The prospect of a better-balanced domestic market and lower prices hit shares of gas producers, which have been some of the top performing stocks in this year's otherwise down market. Antero Resources Corp. lost 11% on Tuesday, while EQT Corp., the biggest U.S. producer, fell more than 9%." [1]

EU gas problem this event makes more sharp. We can expect more noises about need for piece over there. Black swan for "Give me German tanks, give me French nukes" Zelensky.

1. Plant's Woes Send Gas Prices Diving
Dezember, Ryan. 
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 15 June 2022: B.12.