Freeport LNG Development LP said Tuesday the third train at its export facility on the upper Texas coast would be offline for another two weeks, extending a month-long outage and providing support for European natural gas prices.
Spokesperson Heather Browne told NGI on Tuesday that the company is working to finish motor repair work after freezing temperatures in January caused electrical issues and knocked the train offline. At the time, Freeport said it expected the unit to be down for at least one month.
The news reversed declines seen earlier in the day for European benchmark Title Transfer Facility (TTF) prices. The April contract finished Tuesday 2% higher and held onto gains made Monday.
However, weak global gas fundamentals have TTF trading below $8/MMBtu at prices not seen since last spring. The contract dipped below that mark last week, along with the Japan-Korea Marker (JKM), which is near a similar level and remains at two-year lows.
TTF is searching for a floor ahead of the injection and cooling season. The continued drop in prices could spur coal-to-gas switching as gas-fired power in Europe is now below the cost of coal-fired electricity.
But mild winter weather, sluggish demand, strong storage inventories and ample supplies leave “room for further losses” unless fundamentals shift dramatically, said trading firm Energi Danmark.
Forecasts for the continent are also trending mild for March.
“This mild weather is likely to further diminish heating demand, potentially easing the strain on European gas storage, which is already significantly above the five-year average,” said Schneider Electric analyst Dogukan Aktas.
According to the European Commission, gas demand fell by 18% between August 2022 and December 2023, when compared to the five years prior to March 2022, before Russia invaded Ukraine and cut off gas exports to the continent.
European gas prices have fallen by 25% since the beginning of the year, prompting Intercontinental Exchange Inc. on Friday to again reduce the collateral required to trade the prompt TTF contract by 31% to 5.96 euros/MWh. It was the fifth time since October that margin rates have been cut by the commodity exchange.
JKM at Two-Year Lows
The market is equally as weak in Asia, where strong storage inventories, a mild winter and limited demand have pushed JKM down. JKM futures are currently trading below $9 for the first time since 2021.
The outlook for this summer appears similar, with major consumers Japan and South Korea poised to bring online more nuclear capacity and utilize more coal-fired power, according to Bloomberg New Energy Finance.
Lower prices, however, are gradually bringing more buyers in the region back to the spot market. Kpler data on Tuesday showed buy tenders for spot cargoes from purchasers in China, India, the Philippines and South Korea.
Meanwhile, continued signs of easing domestic production volumes in the United States are finally helping to lift Henry Hub futures. While the expiring March contract was down on thin trading volume, April was up again on Tuesday.
After a 5.6-cent gain the previous session, the March Nymex gas futures contract on Tuesday shed 4.4 cents day/day. It settled at $1.615/MMBtu before rolling off the books. The April contract, however, posted a gain of 6.4 cents to $1.808 and will take over as the front month on Wednesday.
Daily production estimates from Wood Mackenzie as of Tuesday continued to show a notable drop in recent samples. Tuesday’s estimate totaled roughly 101.7 Bcf/d, down around 2.3 Bcf/d since late last week, Wood Mackenzie analyst Laura Munder told clients.
Given high storage inventories exiting the winter heating season, “the need to curtail supply remains considerable,” said Mobius Risk Group analysts. In light of recent production estimates, “the question many will be asking is if this is already occurring, or if the declines currently reported are a function of ‘price majeure,’ or just a temporary maintenance-related dip.”
Elsewhere on Tuesday, Eni SpA said the first cargo was being loaded at the 0.5 million metric tons/year (mmty) Tango floating liquefied natural gas (FLNG) facility offshore Congo, bringing the country into the world’s group of LNG exporters. Eni introduced first gas to the vessel in December, a year after the project was sanctioned.
Also in Africa, Kosmos Energy Ltd. said the FLNG facility it’s developing with BP plc off the coasts of Mauritania and Senegal is facing delays. The 2.3 mmty vessel is now expected to produce its first LNG in 4Q2024.
The vessel arrived at the project site last month. At the time, the developers said start-up would occur in the coming months.
