U.S. Natural Gas Unfazed by War

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Written by Daniel Graeber for IIR News Intelligence (Sugar Land, Texas)

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Summary

European natural gas prices are up 34% from year-ago levels as war in the Middle East limits supplies--but U.S. markets are unaffected by the conflict.

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U.S. Demand Lower Year-on-Year

While the war in the Middle East squeezes foreign markets for natural gas, warm spring weather in North America is suppressing markets, according to data from Industrial Info Resources and other outlets.

Henry Hub, the U.S. benchmark for the wholesale price of natural gas, was trading at about $2.60 per million British thermal units (MMBtu) on Wednesday and averaged $2.63 over the five-day period. That compares to an average of $3.48 per MMBtu for the same period last year.

That compares with the price at the Dutch Title Transfer Facility (TTF), which serves as the European benchmark for the price of natural gas. TTF is up 34% from year-ago levels as the conflict in the Middle East creates supply-side issues. Qatar, one of the largest exporters of liquefied natural gas (LNG), saw production sidelined and its tankers targeted by war, leaving Europe in the cold.

Data from Gas Infrastructure Europe (GIE) show gas storage levels are just above 28% in the European Union, a record low.

In the U.S. markets, however, supplies are ample. The U.S. is the largest natural gas producer in the world. On Wednesday, IIR Energy in its NATGAS Today report showed total inland natural gas production at about 108 billion cubic feet as of Wednesday. That's down from month-ago levels closer to 110 billion cubic feet, with most of the curtailments coming from the Appalachia shale patch in Pennsylvania.

Demand was about 67 billion cubic feet Wednesday, a slight increase. But demand is about 5% lower than at this time last year because of warmer weather. It's been in the mid-60s for much of the week at O'Hare International Airport in Chicago, compared to an average closer to 50 degrees Fahrenheit, curtailing demand for natural gas in the domestic market

That's a reversal from the winter heating season. The U.S. Energy Information Administration (EIA), part of the U.S. Department of Energy, said in a monthly market report for March that winter heating season, which runs from November to March, had 2% more home-heating days than the 10-year winter average.

By the Numbers

• 34% year-over-year increase in European natural gas prices
• 25% year-over-year decline in U.S. natural gas prices

LNG Exports Remain Strong

Based on the amount of feed gas sent to the facilities for exports as LNG, levels remain robust. IIR Energy show a five-day average of 18.9 billion cubic feet per day (Bcf/d) delivered, compared to federal forecasts for 16.7 Bcf/d in exports as LNG for the annual average.

In its March report, the EIA said it doesn't expect the war in the Middle East to impact the domestic market.

"We expect U.S. natural gas prices to be relatively unaffected by this development, as LNG export facilities were already operating at a high level of utilization prior to the Middle East conflict, limiting the ability to export additional volumes in the near term," analysts wrote last month.

The start of the Golden Pass terminal is supporting domestic gains in LNG volumes. U.S. federal regulators in mid-December gave joint venture partners ExxonMobil and QatarEnergy the green light to start operations from the first liquefaction unit, or train. With a total investment value of $3.8 billion, the facility will eventually churn out 5.2 million metric tons per annum (MTPA) of LNG.

According to Industrial Info Resources data, Golden Pass entered the commissioning phase in February. Subscribers to Industrial Info's Global Market Intelligence (GMI) Oil & Gas Production Project Database can learn more--including capacities, investment values and necessary equipment-- from a detailed list project reports.

Key Takeaways

• U.S. natural gas market insulated from war
• Warm weather keeping a lid on market prices

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About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news, and analysis on the industrial process, manufacturing, and energy-related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified, and verified plant and project opportunities. Across the world, IIR is tracking over 250,000 current and future projects worth $30.2 Trillion (USD).