Freeport LNG Still Mostly Shut Down – 5 Days in Row at < 5% of Gas
The problem-plagued Freeport LNG export plant remains out of order. The plant had been mostly offline following an episode of cold temps in January (see Freeport LNG Repairs Won’t be Done Until May – 2 Trains Offline). Freeport announced that two of the three trains at its facility would remain out of service for testing and repairs through May. In late March, Train 3 at the plant came back online (see Freeport LNG Maintenance Work Continues – Gas Flows to One Train). However, a new problem at Train 3 took it offline last week (see NatGas Flows to Freeport LNG Export Plant Drop to Near Zero, Again). According to Reuters, as of Monday this week, the plant has remained offline for five days running.
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BMI, a Fitch Solutions company, hauled out its hefty crystal ball to make predictions about the “front month” contract price for NYMEX natural gas (based on the Henry Hub) for the next five years, beginning with 2024. BMI’s report also includes an aggregation of predictions by Bloomberg called the Bloomberg Consensus. What does it show? If the predicted average price in 2024 comes to be, we’ll need to see a pretty stiff rise in the price soon!
According to the U.S. Energy Information Administration (EIA), working natural gas inventories in the U.S. ended the winter heating season (November 1–March 31) at 2,290 billion cubic feet (Bcf), which is 39% more than the previous five-year (2019–23) average. Why is there so much in inventory? Warm weather all winter led to less usage of natural gas. Couple that with high production and it’s a prescription for too much gas in inventory, which leads to (you guessed it), low prices.
Once a month, the analysts at the U.S. Energy Information Administration (EIA) issue the agency’s Short-Term Energy Outlook (STEO), their best guess about where energy prices and production will go in the next 12 months or so. We sometimes poke good-natured fun at the EIA because their predictions go up in one month, and in the next month, they go down, etc. What about the latest STEO dart board, published on Tuesday? EIA predicts the average spot price for natural gas will be $2.20/MMBtu in 2024. That’s down significantly (17%) from the $2.65 it predicted just two months ago in February’s report (see 
We are currently mired in some of the lowest prices for natural gas in the last 27 years (see 
While you wouldn’t know it from looking at the NYMEX Henry Hub futures price, the cuts in production from Marcellus/Utica producers, including Chesapeake Energy, ETQ, Antero Resources, Coterra Energy, CNX Resources, and others, IS having an effect on prices — on the spot prices of physically-traded natural gas in the M-U region. Over the past eight weeks, gas production from the Marcellus and Utica shale has fallen sharply.
Natural gas is, as we have often pointed out, one of the purest commodity markets in existence. The classic supply/demand curve is at work. If there’s more supply than demand, prices for gas move down. And conversely, if there’s more demand than supply, prices move higher. We have been stuck in a sucky price pattern this year, not helped by a very moderate winter. The phrase on the lips of every landowner and driller is, When will the price move higher? According to analysts from Morgan Stanley, not anytime soon.
For years, we have watched natural gas production in oil-focused plays like the Permian (in Texas and New Mexico) steadily rise. It was an annoyance, a curiosity, mostly an afterthought because production in the Marcellus/Utica, where we concentrate our attention, was also rising and quite dominant. But the M-U hit a plateau in December 2019 and in January 2020 began a long-term trend of staying about even (see 
Earlier this week, MDN told you that EQT, the country’s largest natural gas producer, had implemented an immediate cutback on natural gas production of 1 billion cubic feet per day (see 
The U.S. benchmark Henry Hub daily natural gas price averaged $1.50 per million British thermal units (MMBtu) on February 20, 2024, the lowest price in inflation-adjusted dollars since “at least” 1997. In fact, when you look at the ten lowest daily Henry Hub natgas spot prices since Jan. 1, 1997, six of the ten lowest prices were in February 2024. The other four were in 2020, as the pandemic was taking hold. Amid this depressing news, there is a silver lining…
Finally, here’s a little good news to write about regarding the price of natural gas! The NYMEX front month futures contract yesterday started the day with a bang based on announcements from the previous evening (in advance of a conference call) from Chesapeake Energy that the company plans to scale back production by roughly 1 Bcfe/d in 2024 from 2023 levels (down 25-28%, see today’s lead story). Chessy’s announcement, along with rumblings from other big drillers about pulling back in 2024, was enough to boost the NYMEX, which closed up $0.20, or 11%, from the previous day. It was the largest one-day percentage gain since Thursday, July 7, 2022.
It feels like the NYMEX Henry Hub futures price for natural gas is in a free fall, heading for $1.50/MMBtu or (gasp) maybe even lower. Yesterday, the NYMEX price for the front month closed at $1.58/MMBtu. The price has been down for eight trading days in a row and is at the lowest price since June 26, 2020 — roughly 45 months. Year-to-date (45 days), the price is down 93.30 cents, or 37%. The national average for spot prices, a metric monitored by NGI, was down 6 cents yesterday to $1.60/MMBtu. Jeesh!
We’re sad to have to report on yet another down day of the NYMEX Henry Hub natural gas futures contract. Yesterday, the NYMEX price closed at $1.77/MMBtu, the lowest closing price for the “front month” contract in 3 1/2 years (since Monday, July 27, 2020). Yesterday’s closing price breaks through the latest “floor” of $1.80, an important psychological barrier traders monitor. As has been the case in recent weeks, weather is cited as the main factor in the low price. It’s just not cold enough this winter to spur big domestic demand for natgas. The price is down 31.4 cents (15%) over the last five trading sessions. How much lower will it go?