CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US English

Freeport LNG reopening: Why is this so important for natural gas markets?

By Angela Barnes

14:17, 21 November 2022

A general photo of an LNG tanker arriving in Boston in the US
Traders continue to monitor LNG export operations at Freeport in the US for potential natural gas price shifts - Photo: Getty

US natural gas prices jumped around 6% on Friday but settled lower on Monday after Freeport LNG Development (Freeport LNG) provided an update on the resumption of its operations at its export facility in Houston, Texas.

US natural gas price chart

Read on to find out why schedule updates at Freeport have caused price swings in the natural gas market – and what the latest market outlook is for the commodity.

What is your sentiment on Natural Gas?

2.1890
Bullish
or
Bearish
Vote to see Traders sentiment!

Full operational restart by March 2023

Freeport said it was targeting initial production at the facility in mid-December and planning a full operational restart, utilising both docks, by March 2023, pending regulatory approval.

The second biggest US LNG export facility has been closed since June, following an explosion. Federal pipeline safety regulators recently released a consultant report which said it was down to human error, inadequate operating and testing procedures, as well as other factors.

“As of November 14th, the reconstruction work necessary to commence initial operations, including utilisation of all three liquefaction trains, two LNG storage tanks and one dock, was approximately 90% complete, with all reconstruction work anticipated to be completed by the end of November. Proposed remedial work activities for a safe restart of initial operations have been submitted to the relevant regulatory agencies for review and approval. Subject to Freeport LNG meeting its regulatory requirements, it is targeting initial production at the facility in mid-December,” Freeport said in a press release on 18 November.

The company further noted that approximately 2 BCF per day of production will be achieved in January 2023. 

“We are committed to moving forward with an uncompromising safety focus and enhanced operational processes that will enable us to chart a safe, sustainable path forward to serve our customers and the broader LNG market as a whole,” Michael Smith, founder, chairman and chief executive of the group said in a press release

Why is Freeport’s reopening important for natural gas markets?

Recent natural gas price swings have been partly attributed to operations stalling and the anticipated restart at the facility, as the market has continued to weigh up conflicting information due to its domestic demand and international supply impacts.

For example, Freeport accounts for around 15% of US liquified natural gas (LNG) export capacity so when it is out of action, it limits suppliers’ ability to meet the current high demand from Europe and parts of Asia, following Russia’s invasion of Ukraine in February, which has limited deliveries of the sought-after commodity.

Silver

29.33 Price
+0.390% 1D Chg, %
Long position overnight fee -0.0198%
Short position overnight fee 0.0116%
Overnight fee time 21:00 (UTC)
Spread 0.032

Gold

2,417.09 Price
+0.390% 1D Chg, %
Long position overnight fee -0.0193%
Short position overnight fee 0.0111%
Overnight fee time 21:00 (UTC)
Spread 0.30

Oil - Brent

80.62 Price
-0.140% 1D Chg, %
Long position overnight fee 0.0244%
Short position overnight fee -0.0464%
Overnight fee time 21:00 (UTC)
Spread 0.032

Natural Gas

2.19 Price
+0.050% 1D Chg, %
Long position overnight fee -0.0596%
Short position overnight fee 0.0377%
Overnight fee time 21:00 (UTC)
Spread 0.0050

Colder weather forecasts in both the US and Europe last week have also supported the expectation that there will be a higher demand for heating, subsequently pushing up prices.

However, the price of US natural gas on Monday settled lower (at around $6.3/MMBtu) despite the colder forecast because the export delays at Freeport means there will be more gas available for domestic use.

In Europe, however, it means delays, although the milder weather forecasts for December will help ease demand. Moreover, the bloc's storage inventories are in good shape for winter.

At the time of writing, the price of natural gas on the European Dutch TTF was up +0.03% to trade around €115.545 per megawatt hour (mwh), after dropping earlier in the session.

Natural gas price outlook

Justin McQueen, senior market strategist at Capital.com, shared his thoughts on the natural gas price volatility.

“The outlook has improved for natural gas, particularly as we head towards more wintery weather, which is likely to keep prices underpinned in the near term. Elsewhere, with the delay of reopening Freeport's LNG terminal confirmed, it does appear that we are seeing a bit of a sell the rumour, buy the fact.

“In turn, natural gas is testing the uptrend from its year-to-date peak where a closing break above puts $7.40-50 in focus,” McQueen said.

Rate this article

Related reading

Capital Com is an execution-only service provider. The material provided in this article is for information purposes only and should not be understood as investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents and has not been prepared in accordance with the legal requirements designed to promote investment research independence. While the information in this communication, or on which this communication is based, has been obtained from sources that Capital.com believes to be reliable and accurate, it has not undergone independent verification. No representation or warranty, whether expressed or implied, is made as to the accuracy or completeness of any information obtained from third parties. If you rely on the information on this page, then you do so entirely at your own risk.

Still looking for a broker you can trust?

Join the 630,000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading