With prices poised to move potentially either way depending on developments in the situation at a major U.S. export terminal that went offline last week, natural gas futures were down a few cents in early trading Monday.
The July Nymex contract was off 5.8 cents to $8.792/MMBtu at around 8:50 a.m. ET. August was down 5.8 cents to $8.809.
Entering the new trading week, price action could pivot on any new information surrounding the length of the outage at the Freeport liquefied natural gas (LNG) terminal following the recent explosion that forced the facility offline, according to analysts.
“News of the duration of the 2.0 Bcf/d Freeport outage could swing natural gas prices in either direction,” EBW Analytics Group senior analyst Eli Rubin said. “In our view, odds favor a prolonged outage or reduced operations at one or more trains, increasing market susceptibility to a near-term retest of support.”
NatGasWeather similarly said it would expect a bearish reaction from the market should the Freeport outage extend to four to five weeks or longer,
On the other hand, “any shortening of the timeline would lead to a spike higher,” the firm said.
Downtime at a major export facility has impacted the equation, but balances continue to point to the need for a greater supply response, according to Rubin.
“After flashing higher in late-May and again early last week, production appears to have settled at 1.0 Bcf/d off recent highs,” Rubin said. “Although Freeport developments could meaningfully alter the natural gas price outlook, until supply begins to move sustainably higher, medium to long-term risks will likely remain weighted to the upside.”
Even with the feed gas demand at Freeport LNG offline for now, the U.S. storage deficit versus the five-year average is on track to rise toward minus-400 Bcf by late this month on strong cooling demand, NatGasWeather said.
The weather outlook underwent only minor changes over the weekend, according to the firm.
National cooling degree day totals for the current week “are expected to be near the hottest of the past 40 years, with many high temperature records likely to be broken and with power burns expected to reach 40-plus Bcf/d, especially days with lighter wind energy generation,” NatGasWeather said.
Demand should fall back to “more seasonal levels” starting around this weekend, but that would be followed by a “hot upper ridge regaining ground over the eastern U.S. June 22-27, thereby resulting in most of the interior U.S. again seeing highs into the 90s,” the firm added.
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June 13, 2022 at 08:04PM
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Freeport LNG Situation Said Pivotal for Market Direction as Natural Gas Called Lower - Natural Gas Intelligence
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