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U.S. natgas futures drop 10% on profit-taking, mild forecasts

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U.S. natural gas futures dropped about 10% on Tuesday, following a 12% rise on

Monday as traders took profits during a period of extreme volatility after the latest forecasts called for the

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weather to remain mild for the next two weeks.

Analysts at energy consulting firm Gelber & Associates said the “early week surge in … gas futures (saw)

signs of exhaustion today as profit-takers pile on.”

That price drop came despite forecasts for higher demand over the next two weeks than previously expected

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and a projected increase in liquefied natural gas (LNG) exports once Freeport LNG’s export plant in Texas

returns to service.

Freeport LNG expects its 2.1-billion-cubic-feet-per-day (bcfd) export plant to return to at least partial

service in early- to mid-November following an unexpected shutdown on June 8 caused by a pipeline explosion.

Freeport informed BP PLC, which buys LNG from the plant, that it expects to resume cargo deliveries

in November.

At least four vessels were already lined up to pick up LNG at Freeport, according to Refinitiv data. Prism

Brilliance and Prism Diversity were waiting off the coast from the plant, while Prism Courage was expected to

arrive on Nov. 4 and Grace Freesia in December.

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Front-month gas futures fell 64.1 cents, or 10.1%, to settle at $5.714 per million British thermal

units (mmBtu). It was the biggest daily percentage gain since a 17% plunge in late June.

On Monday, the contract soared about 12% to its highest since Oct. 14.

Rapid price changes in recent weeks boosted the contract’s 30-day implied volatility index to

its highest since October 2021. The market uses implied volatility to estimate likely price changes in the

future.

Despite recent price declines, U.S. gas futures were still up about 55% this year as much higher global

gas prices feed demand for U.S. exports due to supply disruptions and sanctions linked to Russia’s Feb. 24

invasion of Ukraine.

Gas was trading at $34 per mmBtu at the Dutch Title Transfer Facility (TTF) in Europe and $28

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at the Japan Korea Marker (JKM) in Asia.

On Monday, when November was still the TTF front-month, the contract closed around $23 per mmBtu, the

lowest close since mid-February. December is now the TTF front-month. TTF closed at a record high of $90.91 on

Aug. 25.

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Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to a record 99.37 bcfd in

October, topping the prior record of 99.28 bcfd in September.

Daily output was on track to drop about 4.5 bcfd to a preliminary five-month low of 95.7 bcfd on Tuesday.

That would be the biggest one-day decline since the 2021 February freeze. Traders, however, noted first of the

month preliminary output was almost always unreliable and revised higher later in the month.

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With the coming of seasonally cooler weather, Refinitiv projected average U.S. gas demand, including

exports, would rise from 98.6 bcfd this week to 101.4 bcfd next week. Those forecasts were higher than

Refinitiv’s outlook on Monday.

The average amount of gas flowing to U.S. LNG export plants slid to 11.3 bcfd in October due to an annual

maintenance outage at the Cove Point LNG plant in Maryland, down from 11.5 bcfd in September. That is well

below the monthly record of 12.9 bcfd in March. The seven big U.S. export plants can turn about 13.8 bcfd of

gas into LNG.

During the first 10 months of 2022, roughly 66%, or 7.0 bcfd, of U.S. LNG exports went to Europe, as

shippers diverted cargoes from Asia to fetch higher prices. Last year, just 29%, or about 2.8 bcfd, of U.S.

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LNG exports went to Europe.

Week ended Week ended Year ago Five-year

Oct 28 Oct 21 Oct 28 average

(Forecast) (Actual) Oct 28

U.S. weekly natgas storage change (bcf): +96 +52 +66 +45

U.S. total natgas in storage (bcf): 3,490 3,394 3,602 3,636

U.S. total storage versus 5-year average -4.0% -5.5%

Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five Year

Last Year Average Average

2021 (2017-2021)

Henry Hub 6.10 6.36 5.12 3.73 2.89

Title Transfer Facility (TTF) 35.50 23.17 27.71 16.04 7.49

Japan Korea Marker (JKM) 27.54 30.16 32.98 18.00 8.95

Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days

Two-Week Total Forecast Current Day Prior Day Prior Year 10-Year 30-Year

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Norm Norm

U.S. GFS HDDs 196 187 221 228 238

U.S. GFS CDDs 21 20 9 20 17

U.S. GFS TDDs 217 207 230 248 255

Refinitiv U.S. Weekly GFS Supply and Demand Forecasts

Prior Week Current Week Next Week This Week Five-Year

Last Year Average For

Month

U.S. Supply (bcfd)

U.S. Lower 48 Dry Production 99.1 99.2 99.8 95.8 89.6

U.S. Imports from Canada 7.5 8.0 8.5 8.7 8.2

U.S. LNG Imports 0.0 0.0 0.0 0.0 0.1

Total U.S. Supply 106.7 107.1 108.3 104.5 97.9

U.S. Demand (bcfd)

U.S. Exports to Canada 2.5 2.8 3.3 2.6 2.9

U.S. Exports to Mexico 5.5 5.5 5.6 5.4 5.1

U.S. LNG Exports 11.4 11.9 12.0 10.6 6.4

U.S. Commercial 7.5 7.9 8.8 9.8 11.5

U.S. Residential 9.4 10.5 12.3 13.8 17.2

U.S. Power Plant 28.4 30.2 29.3 29.3 26.0

U.S. Industrial 22.6 22.6 22.8 23.2 24.0

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U.S. Plant Fuel 4.9 4.9 4.9 4.9 4.9

U.S. Pipe Distribution 2.0 2.1 2.1 2.1 2.1

U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1

Total U.S. Consumption 74.8 78.4 80.5 83.2 85.8

Total U.S. Demand 94.2 98.6 101.4 101.8 100.2

U.S. weekly power generation percent by fuel – EIA

Week ended Week ended Week ended Week ended Week ended

Nov 4 Oct 28 Oct 21 Oct 14 Oct 7

Wind 6 15 11 11 9

Solar 3 3 3 4 4

Hydro 5 5 5 5 6

Other 2 2 3 3 2

Petroleum 0 0 0 0 0

Natural Gas 41 37 39 41 41

Coal 21 18 19 18 18

Nuclear 21 19 19 19 21

SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)

Hub Current Day Prior Day

Henry Hub 5.02 5.02

Transco Z6 New York 3.25 3.42

PG&E Citygate 7.75 6.70

Dominion South 2.91 3.20

Chicago Citygate 4.14 4.47

Algonquin Citygate 4.00 3.75

SoCal Citygate 6.00 5.75

Waha Hub 3.68 3.23

AECO 4.44 1.50

SNL U.S. Power Next-Day Prices ($ per megawatt-hour)

Hub Current Day Prior Day

New England 59.50 48.75

PJM West 56.75 47.75

Ercot North 42.00 54.50

Mid C 78.00 71.25

Palo Verde 64.75 55.50

SP-15 66.75 57.25

(Reporting by Scott DiSavino; Editing by Andrea Ricci and Leslie Adler)

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