Natural gas posts worst daily loss in 19 years after Freeport LNG restart delay

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U.S. natural gas prices (NG1:COM) plunged 16.5% Thursday to finish at $5.424/MMBtu, the biggest one-day percentage decline since February 2003, after an inventory report showed a larger than expected storage build that raised concerns about an oversupplied market.

Natural gas went into freefall around midday Thursday after U.S. regulators said they found unsafe conditions at the Freeport LNG export terminal in Texas and will not allow the plant to restart until the completion of an outside analysis.

Gas-focused equities closed with sharp losses: (CRK) -10.4%, (AR) -8.5%, (EQT) -8.3%, (RRC) -7.2%, (SWN) -6.8%, (CHK) -6.8%, (CTRA) -3.4%.

Strength in U.S. natural gas had been lifting domestic coal prices, and coal-focused equities also fell today: (BTU) -7%, (NC) -7%, (METC) -6.4%, (ARCH) -5.6%, (HCC) -4.9%, (AMR) -4.8%, (CEIX) -3.9%.

ETFs: (NYSEARCA:UNG), (BOIL), (KOLD), (UNL), (UGAZF), (DGAZ), (FCG)

Natural gas prices have fallen ~40% since Freeport LNG was shuttered June 8 due to an explosion, and the regulator's move points to further delays at the plant, which are expected to lead to lower prices since more of Freeport's fuel is now available for domestic consumption rather than for export to Europe.

Freeport LNG accounts for ~17% of liquefied natural gas processing capacity in the U.S.

The U.S. Energy Information Administration said inventory for the previous week rose by 82B cf, ~10% above expectations, but OTC Global Holdings analyst Campbell Faulkner pointed to the "sensitivity of the supply/demand balance that natural gas is under for the summer cooling demand season."

"When the commodity is at such high price levels due to perceived scarcity, any fundamental indicator will cause the commodity to swing violently either up or down," Faulkner told CNBC.

Russia has reduced gas supplies to Europe, forcing buyers to turn to liquefied natural gas imports and causing concerns about supplies ahead of peak demand this winter.

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