Freeport LNG, the long-sleeping Gulf Coast giant began stirring last week, news warmly welcomed by the US and global gas markets with open arms, but mild demand is keeping prices lower.

Freeport LNG took in its first tanker since the fire in June 2022 shuttered the plant then eagerly waved farewell to LNG volumes that had been stranded for months.

BP’s Kmarin Diamond (previously British Diamond) was on hand to free up space in the facility's LNG tanks after they were granted permission to discharge existing volumes that had been stored since the shutdown, about 330,000m3.

The tanker promptly loaded and departed on February 11, 2023, en route to Egypt.

Korea’s SK E&S Prism Agility is also heading to the plant to pick up more LNG volumes.

These are long-awaited and encouraging signs that the Freeport LNG restart is on track and expected to begin liquefaction and export soon.

Freeport LNG feed gas volumes increased to nearly 400 MMcfd this week – the highest levels reported since the outage.

However, the plant still has a few requirements and approvals that need to be met for the Texas plant to bring all three trains up to full capacity.

On Monday, Freeport LNG requested permission to return to full commercial operations, stating that the operator has completed all necessary corrective work to begin producing LNG from Train 1 and Train 3 and is nearing the completion of work on Train 2.

We now anticipate Freeport LNG will achieve partial re-start this month, but incremental LNG export volumes are expected to be minimal in February.

We expect the plant will bring all three trains online in March, with a full ramp-up by early April.

Given the facility is capable of providing over 20% of total US LNG exports, the Freeport LNG outage played a significant role in shaping US gas market fundamentals in 2022 and will continue to do so going forward.

Markets wrangled to price in the effects of export declines and 2 Bcfd of gas left behind in domestic markets.

Freeport’s role will not be diminished in 2023 as well, as this increased plant activity has created a price floor when natural gas demand has continued to fall on warmer weather forecasts alongside strengthened dry gas production.

US gas stocks withdrew 217 Bcf of gas from storage to reach 2,366 Bcf for the week ending February 3 but managed to maintain levels above the five-year average.

With the latest weather forecasts pointing to bearish temperatures across the country in the coming days, weeks, and even into the summer months, we could be staring down the barrel of a “weak summer demand” gun.

Heating demand has been low, but power demand remains resilient due to low gas prices inducing gas burns.

This occurrence has been supportive of US gas consumption.

In fact, since gas prices have fallen to levels not observed since late 2020, average gas consumption in power generation this month is now 17% higher than this time last year, which is indicative of increased competition of gas-for-power, not to mention the growing decline of coal-fired generating units in recent years.

Moreover, we expect power demand to remain high this year as lowered gas prices are expected to hold throughout the year.

We anticipate LNG export demand will hold strong this year with the combination of steady European demand and the comeback of Asian demand, specifically from China, helping to support US LNG export demand.

However, this uptick likely won’t happen until mid-2023. Still, total dry gas production will need to see growth this year to meet domestic and export demand.

US dry gas production levels have maintained around 100 Bcfd, but even in a lowered gas price environment this year, we expect supply will rally.