Freeport LNG Outage Reverses Relief Rally Attempt in NatGas

In an EBW Analytics Group report sent to Rigzone by the EBW team today, Eli Rubin, an energy analyst at the company, outlined that “another Freeport LNG outage reverse[d a]… relief rally attempt” in natural gas on Wednesday.

The report pointed out that the September natural gas contract closed at $3.405 per million British thermal units (MMBtu) yesterday. It highlighted that this represented a drop of 9.7 cents, or 3.1 percent, compared to Tuesday’s close.  

“Although the September natural gas contract reached $3.186 [per MMBtu] yesterday, another Freeport LNG outage slashed Gulf Coast physical demand 1.8 billion cubic feet per day and sent the NYMEX front-month down to test the $3.00 per MMBtu psychological level,” Rubin said in the report.

The EBW analyst warned in the report that, with “breaking key technical support at $3.06 per MMBtu, mild near-term weather, natural gas storage surpluses vs. the five-year average primed to achieve new heights, and ongoing LNG weakness, September appears positioned for another leg lower in search of support”.

Rubin highlighted that Henry Hub at $2.97 per MMBtu yesterday “will remain critical to monitor during near-term weather weakness in potentially helping to define near-term downside risks”.

“Consensus expectations anticipate a 36-40 billion cubic foot build with this morning’s EIA [U.S. Energy Information Administration] storage report,” Rubin went on to note in the report.

“Following last week’s bullish surprise, a wide range of outcomes is possible –  potentially introducing additional volatility risks at the front of the curve,” he added.

Rigzone contacted Freeport LNG for comment on EBW’s report. In response, a Freeport LNG spokesperson told Rigzone, “one important thing to be noted here is that the Freeport LNG outage was caused by an external factor; an apparent power outage yesterday that affected the town of Freeport and some of the surrounding communities”.

Rigzone has contacted CenterPoint Energy for comment on Freeport LNG’s statement. At the time of writing, CenterPoint Energy has not responded to Rigzone. The company states on its site that it “maintain[s] the wires, poles and electric infrastructure serving more than 2.9 million metered customers in the greater Houston area and in southwestern Indiana”.

In an EBW  report sent to Rigzone by the EBW team on Wednesday, Rubin noted that the August natural gas contract “rolled off the board at $3.081 … [on Tuesday] with the NYMEX curve bouncing off key technical support”.

“While a relief rally attempts to extend in the immediate term, though, September faces challenges from (i) rapidly fading CDDs [cooling degree days], (ii) soft Henry Hub spot prices, (iii) possible production uptick today and tomorrow, and (iv) possible new heights in the storage surplus vs. five-year average,” Rubin added in that report.

“Daily cooling demand may plunge six CDDs into Saturday. While weak Henry Hub physical performance during the heat wave appears to limit near-term fundamental upside potential, the possibility of relative physical strength this week could similarly sap downside risks,” Rubin continued.

“Despite near-term challenges, natural gas appears modestly oversold on a seasonal basis, the market may increasingly focus on building Week 3 heat, and recently soft LNG may strengthen,” he went on to state in the report.

“While this aligns with chances for a technical relief rally, chances for a durable rebound appear fundamentally stronger over the next 30-45 days,” he noted.

In that report, EBW highlighted that the September natural gas contract closed at $3.142 per MMBtu on Tuesday. That represented an increase of 7.6 cents, or 2.5 percent, EBW pointed out in that report.

The EIA’s next weekly natural gas storage report is scheduled to be released today. It will include data for the week ending July 25. In its most recent weekly natural gas storage report at the time of writing, which was released on July 24 and included data for the week ending July 18, the EIA stated that working gas in storage was 3,075 billion cubic feet as of July 18, according to its estimates.

“This represents a net increase of 23 billion cubic feet from the previous week,” the EIA said in that report.

“Stocks were 153 billion cubic feet less than last year at this time and 171 billion cubic feet above the five-year average of 2,904 billion cubic feet. At 3,075 billion cubic feet, total working gas is within the five-year historical range,” the EIA added.

To contact the author, email andreas.exarheas@rigzone.com