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Natural Gas Prices Under Pressure As Production Climbs

1. Restart of Freeport LNG Remains Uncertain

- Despite market rumors suggesting a restart might be delayed again, Freeport LNG is sticking to its original pledge of resuming production in the second half of January.

- Freeport LNG is the US’ second largest gas liquefaction facility with three trains and a 15 mtpa capacity. Since its explosion in June 2022 overall exports out of the US dropped by 15%.

- The wider gas market increasingly expects the January restart to be delayed after the US Federal Energy Regulatory Commission did not provide a formal reply to Freeport’s assessment report.

- Should Freeport return, feedgas deliveries to liquefaction terminals across the US are expected to increase by some 2 BCf per day, currently trending at 12.3 BCF/d.

2. US Natural Gas Prices Plummet on Overproduction

- US natural gas prices have halved in just under a month, currently trading at $3.7 per mmBtu, as rapidly increasing production is outstripping demand and putting pressure on infrastructure.

- The slump in prices was bolstered by a substantial decline in gas inventories on the back of winter storm Elliott in late December, ending 2022 at 293 bcf, 10% below the 5-year average.

- As the end of winter is set to lower gas demand by March, the rise in gas production will further pressurize prices with Henry Hub futures now in full-blown contango.

- Even after the expected restart of Freeport LNG, structurally…

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