U.S. Natgas Slides 4% to One-Week Low on Less Cold Forecast

Those big inventory builds could boost gas stockpiles to near- or even above-normal levels for the first time since January 2022.

SEATTLE (Oil Monster): U.S. natural gas futures fell about 4% to a one-week low on Wednesday on forecasts for less cold weather in late November amid continued volatility.

Analysts said the market also remained hyper focused on rumors the Freeport liquefied natural gas (LNG) export plant in Texas may not return in November since it has not yet filed its return to service plan with federal regulators. Demand for gas will rise once Freeport returns.

Freeport LNG, however, has said repeatedly that it still expects the 2.1 billion-cubic-feet-per-day (bcfd) export plant to return to at least partial service in November following an unexpected shutdown on June 8 caused by a pipeline explosion.

Freeport LNG submitted a draft Root Cause Failure Analysis to the Department of Transportation's Pipeline and Hazardous Materials Safety Administration (PHMSA) on Nov. 1, according to sources familiar with the filing. The next step is for Freeport to submit a request to resume service.

Several vessels were waiting to pick up LNG from Freeport, according to Refinitiv data. Prism Brilliance, Prism Diversity and Prism Courage were offshore from the plant, while LNG Rosenrot and Prism Agility were expected to arrive in late November.

Futures were also under pressure due to what will likely be federal reports showing much bigger-than-usual gas storage builds this week and next, and expectations that Tropical Storm Nicole will strengthen into a hurricane before hitting the East Coast of Florida on Wednesday night and then moving up the U.S. East Coast toward Georgia and the Carolinas on Thursday and Friday.

Those big inventory builds could boost gas stockpiles to near- or even above-normal levels for the first time since January 2022.

As for Nicole, traders said storms usually cause power outages that reduce demand for gas-fired generation.

Front-month gas futures fell 27.3 cents, or 4.4%, to settle at $5.865 per million British thermal units (mmBtu), their lowest close since Nov. 1.

Rapid price changes over the past couple of weeks - futures gained or lost more than 5% on eight of the past 10 days - boosted the contract's 30-day implied volatility index to its highest since hitting a record high in October 2021. The market uses implied volatility to estimate likely price changes in the future.

Analysts at energy consulting firm Gelber & Associates said some of the recent volatility came after some hedge funds determined that prices fell too far late last week and started a buying program to squeeze shorts out of the market. After prices rallied on Friday and Monday, Gelber said, 'The buying quickly turned to profit-taking as the hedge funds reversed their positions.'

'We foresee the potential for frequent, exaggerated price volatility over the winter months,' Gelber said.

Despite recent declines, gas futures were still up about 58% so far this year as much higher global gas prices feed demand for U.S. exports due to supply disruptions and sanctions linked to Russia's invasion of Ukraine.

Gas was trading at $32 per mmBtu at the Dutch Title Transfer Facility (TTF) in Europe and $28 at the Japan Korea Marker (JKM) in Asia.

Courtesy:www.reuters.com