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U.S. natural gas demand could be on track to hit record lows in January if unseasonably warm weather sticks around, according to Rystad Energy Vice President Emily McClain.
“Despite consistently robust LNG demand, totaling around seven million tons, particularly from European buyers, prices are falling and expected to continue bearish momentum until winter weather returns,” McClain said in a market note sent to Rigzone late Tuesday.
“On the demand side, the latest forecasts point to warmer weather ahead, with the start of 2023 well above average temperatures,” McClain added.
According to a U.S. short term regional temperature forecast, which was included in the note and cited NOAA/NCEP and Rystad’s U.S. Gas Market Dashboard as sources, weather in the East, Midwest and South Central will be above normal from January 9 to January 25. Mountain and Pacific weather will also be above normal temperatures for a notable chunk of that timeframe, the forecast showed.
McClain also warned in the market note that the Freeport LNG restart could be pushed out further “increasing downward price pressure”. The analyst highlighted in the note that additional volumes circulate in the domestic market from the Freeport LNG outage.
At the time of writing, the Henry Hub gas price is trading at $3.71 per million British thermal units (MMBtu). The commodity closed near $7 per MMBtu in mid-December before plummeting to a close of $3.71 per MMBtu on January 6. The highest 2022 Henry Hub price close came on August 22 at $9.68 per MMBtu.
On December 23, 2022, Freeport LNG announced that it did not anticipate commencing the initial restart of its liquefaction facility until the second half of January. In November last year, Freeport LNG revealed that it was targeting initial production in mid-December. Back in August 2022, Freeport LNG anticipated that initial production could commence in early to mid-November.
