Gas Futures Rise as Gas Flows to Freeport LNG

An aerial view of the Excelsior ship docked at Freeport's LNG terminal in Texas
Freeport LNG's ship Excelsior docked at Freeport's LNG terminal in Freeport, Texas. Freeport LNG Development, L.P.
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U.S. methane gas futures jumped between 5% and 7% Tuesday in response to reports Freeport LNG began receiving methane gas over the weekend and predictions for cold weather across the country.

The Texas gas export terminal has been shut down for more than seven months after a major explosion in June. Freeport LNG accounts for approximately 20% of the gas exported from the U.S., so with its closure more gas has stayed in the country and with the increased supply, domestic prices dropped.

Even though many analysts expect the plant will remain closed until at least February, the potential for Freeport LNG to return to full operation and begin exporting gas overseas (where prices are substantially higher) was enough to push up domestic prices.

Gas futures have repeatedly spiked on Freeport LNG’s repeated (and then delayed) reopening announcements, highlighting the degree to which LNG exports are raising energy prices for American families and businesses.

As reported by ABC News:

“The prices people are paying for their heating bills right now are up enormously,” Eli Rubin, an analyst with EBW Analytics Group, told ABC News.

The sky-high prices are primarily due to a jump in U.S. gas exports in response to heightened demand from European countries that previously relied on natural gas from Russia, analysts told ABC News.

After Russia invaded Ukraine last February, those nations sought alternative sources of natural gas, including the U.S, they added.

“There was a huge shortage in Europe,” Rubin said. In turn, the U.S. sent more natural gas for sale on the international market, leaving less available for U.S. consumption. When domestic demand outpaced supply, it sent prices soaring.

“There was a supply crunch,” Clark Williams-Derry, an energy analyst at the Institute for Energy Economics and Financial Analysis, told ABC News. “Essentially, we were exporting more and more natural gas and importing high prices as a result.”

For a deeper dive:

Freeport & gas futures: Reuters, Reuters, OilPrice, Seeking Alpha; Energy prices: ABC

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