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US Natural Gas Prices Remain Low

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US natural gas futures were trading at about $3.7/MMBtu after dropping as low as $3.4 during the previous session. The lowest level since June 2021.

Due to weaker demand and as gas output is once more approaching record levels, natural gas prices in the US have decreased by more than 10% since the beginning of 2023. This marked the worst year-to-date start.

In addition, the Texas Freeport LNG export facility, which had to shut down in June due to a fire, postponed its return until the second half of January, adding to the supply on the domestic market.

Additionally, traders are concerned that the facility won’t be back online until the first or second quarter because more work will need to be done to satisfy federal regulators.

It’s unlikely that anyone would want to develop export terminals even if LNG exports were permitted. Just in the last ten years, Shell/TransCanada attempted to obtain permits for an LNG import facility off the coast of New York for five years and $27 million. Still, they were completely unsuccessful and had no results to show for their efforts. (At the time, it was anticipated that the project would cut US consumer energy prices, but NIMBYism prevented it from happening.)

13 LNG import terminals and 0 LNG export terminals are now in the US. It would take 5 to 10 years before the first cubic foot of gas was liquefied if every major oil firm and pipeline operator began construction on an export terminal today. By that time, the market economics might be entirely different. All those import terminals become obsolete liabilities in under ten years.

The fact that most oil wells also generate some gas is an additional factor influencing the pricing. This means that an increase in oil supply must necessarily result in a decrease in gas supply. Which has the unintended consequence of increasing gas supply when oil demand rises. The key point is that numerous elements work together. To maintain gas costs lower than oil prices. Even though there are many other challenges concerning storage, transportation, and seasonal demand.

The US opposed the Nord Stream 2 pipeline. Mainly because it would allow Gazprom to supply more natural gas to Europe without going through Ukraine (which, from a Russian perspective, is problematic). Most other pipelines are already operating at capacity limits during the peak winter demand. And they can significantly undercut US competition if they so desire.

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