Rising US LNG exports boost interest in natgas futures
(Reuters) — A surge in speculative interest in the US LNG export boom has pushed open interest in natural gas futures to an all-time high, traders said on Thursday.
Open interest, which measures the number of contracts outstanding, in the Henry Hub front-month hit 386,826 on the New York Mercantile Exchange on Wednesday, topping the previous high of 366,383 set in May 2016, according to Reuters data going back to 1990.
“There has been a narrative around the market that the LNG exports are going to be the difference maker this winter, in terms of getting supplies tight and prices higher,” said John Kilduff, partner at energy hedge fund Again Capital LLC in New York.
“The thesis is attracting a lot of interest,” he said, noting “the 11–15 day weather models recently exploded, forecasting a fierce cold air mass by mid-month December. The fuse appears lit.”
Futures for calendar 2018 have been trading at a premium over calendar 2019 since August 2016 due primarily to expectations of rising exports next year.
The United States is expected to be a net gas exporter on an annual basis in 2017 for the first time in 60 years, due in part to sharp growth in LNG shipments abroad.
The country, which was not exporting any LNG at the start of 2016, is expected to have the world’s third-biggest export capacity of the fuel by the end of 2018, behind only current market leaders Australia and Kuwait.
That rapid growth in LNG exports was due to the ramp up of four 0.6-Bcfd liquefaction trains at Cheniere Energy Inc’s Sabine Pass LNG export facility in Louisiana over the past two years. The first of those trains entered service in February 2016.
By the end of the year, another LNG export facility is expected to join Sabine Pass when Dominion Energy Inc’s 0.7-bcfd Cove Point terminal in Maryland enters service.
In 2018, three more US liquefaction trains are expected to enter service—a 0.3-Bcfd unit at Kinder Morgan Inc’s Elba Island facility in Georgia, a 0.7-Bcfd unit at Freeport LNG’s Freeport facility in Texas and a 0.6-Bcfd unit at Cheniere’s Corpus Christi facility in Texas.
Reporting by Scott DiSavino; Editing by Tom Brown
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At October’s HPI Forecast Breakfast for our sister publication, <i>Hydrocarbon Processing</i>, I shared <i>Gas Processing</i>’s forecast on change in the LNG industry.
In one of the toughest markets in the history of gas compression, we are challenged to deliver more with less.
The New LNG Imperative
The shale gas boom established the US as the world’s leading natural gas producer and is responsible for billions of dollars of investments in the US gas processing industry. Since 2012, the US has witnessed unprecedented growth in new gas processing capacity and infrastructure. This rise is due to greater production of domestic shale gas, which is providing cheap, available feedstock to fuel the domestic gas processing, LNG and petrochemical industries. New gas processing projects include the construction of billions of cubic feet per day of new cryogenic and gas processing capacity, NGL fractionators, multi-billion-dollar pipeline infrastructure projects, and the development of millions of tons per year of new LNG export terminal construction. Attend this webcast to hear from Lee Nichols, Editor/Associate Publisher, Hydrocarbon Processing, Scott Allgood, Director-Data Services, Energy Web Atlas and Peregrine Bush, Senior Cartographic Editor, Petroleum Economist as they discuss the future of LNG and the application of Energy Web Atlas, a web-based GIS platform which allows users to track real-time information for every LNG project.
November 29, 2017 10am CST
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