Cold weather impacts on US natural gas

Every winter the unpredictability of freezing temperatures poses risks to the production of US natural gas. Freeze-offs are a potential and serious problem starting at the production wellhead through the last point in the customer delivery system. Whether the gas is 'associated gas' from a crude oil well, or 'dry gas' from a gas well, the possibility for hydrates and the resultant problems, is real. The onset of cold temperatures also drives increased heating demand for natural gas met predominantly through withdrawals of gas from storage. 

Severe cold weather creates both challenges and opportunities in the US natural gas market, influencing supply, demand, prices, and operational logistics. Traders and analysts operating in these markets need to closely monitor weather forecasts and market conditions to effectively manage risks and capitalise on opportunities at pace.  

In this round-up of the effects of cold weather on the US natural gas market in 2024 so far, we use our real time data and analytics to explore a few of these events and reflect on how they have shaped market developments so far. 

Fill in the form to receive a sample of our freeze-report and storage analysis and read on for a summary.  

Winter freeze-off forecast 

During the cold weather surge this January 2024 many market participants were left looking for answers when trying to figure out what the freeze-off and storage impact would be. During this time, we released an all-new freeze-off model forecasting freeze-offs two weeks out by region with a high level of accuracy. Our storage estimates were also industry-leading with less than a 1% error during the 3rd largest withdrawal in US history. 

During the rapid increase of domestic US production over the last 10 years freeze-offs have increased at an accelerated rate, indicating that the new production we have seen in recent years is more vulnerable to freezing weather than legacy production. We produced a regional freeze-off forecast heading into this event. Freeze-offs are currently actualizing close to our “most likely” scenario. 

Another interesting shift we have seen is the addition of LNG exports to the balancing equation. While normally a structural demand component, we have seen liquefaction facilities turn down exports during events like this. This has proven crucial to reliability particularly on the US Gulf Coast. 

Finally, while not seen here the power stack did play a role in lessening the impact of this year’s event. Despite a rather large increase in power load, it was not natural gas generation that ramped up to meet higher load. With natural gas trading at elevated prices around the US, coal acted as the marginal molecule for incremental generation. Gas started the month at 69% of the thermal stack and dropped to as low as 60% of the thermal stack when demand peaked. 

Fill in the form to download the data from our Daily Macro Supply & Demand report. 

Freeport LNG unit faced a month-long outage 

LNG exporter Freeport LNG announced in January that it expects one of three liquefaction units at its Texas plant to be out of service for about a month after it faced a technical issue during the Arctic freeze in January. 

Power draw to Freeport LNG continues to remain low with train three remaining offline a recent flyover of the facility confirms. A Freeport spokesperson explained the outage will likely last until the latter half of February. Wood Mackenzie power line monitors show the facility running steadily at 67% of max operations. 
 
Since Winter Storm Heather ending on 15 January, total exports from Freeport have likely decreased by more than 25 billion cubic feet as shipping has slowed due to decreased liquefaction capacity. Additionally, many ships leaving the facility have done so without filling up their entire tank capacity. 

Corpus Christi train 3 shutdown 

On 4 February, Corpus Christi Train 3 underwent a shutdown, starting with the first engine going offline at around 14:44 CT. Subsequently, the remaining engines ceased operation over the following hours. The outage may be associated with the scheduled ESD testing at the Sinton Compressor Station. 
 
Evening cycle nominations for 4 February are listed at 1.5 billion cubic feet (bcf). Evening cycle nominations for 5 February are posted at 1.8 bcf, and timely nominations for 5 February are available at 1.52 bcf. Heavy flaring began on 5 February at 04:28 CT, and the facility's flaring activity remained observable at the time of publication. 

As we enter shoulder maintenance season, LNG shutdowns will continue to add to the supply glut the US currently faces. With the risk of US storage inventories potentially constraining before the end of summer, staying on top of these outages will be a key part of navigating this summer’s path risk. 

With our North American LNG Service you can monitor the US LNG supply chain in real time utilising infrared technology, as well as accessing insights into production status, meaning that our clients received information on these shut downs almost instantly.  

Oil refinery surges in the US Gulf Coast 

In other news, due to exceptionally cold temperatures in the region, more than 1.4m barrels per day (bpd) of the US Gulf Coast’s refining capacity remained offline as of January 23. A combination of extreme cold and planned work in the region led to a sudden surge in refinery outages, which initially peaked at 1.6mn bpd of offline crude distillation unit (CDU) capacity on January 16. 
 
While temperatures in the region have since returned to seasonal norms, the amount of CDU capacity shut in PADD 3 has remained stubbornly high for this early in the year. 
 
Using our North American Refinery Intelligence Service, we were about to alert our clients quickly as the product monitors refineries in real time utilising infrared technology. 

Maintain your competitive edge in the commodities trading market 

The past two months witnessed notable fluctuations in US commodities markets, driven primarily by cold weather patterns impacting supply, demand, and prices. As the industry navigates through uncertainties, real time data was essential for our clients to effectively manage volatility and capitalise on emerging opportunities.  

The global commodities market is changing rapidly and to make quick and smart decisions you need access to real-time and historical data, forecasts, analytical insight, tools and software solutions. Our real-time data analytics services leverage a combination of unique data collection techniques, data science and a team of experienced energy market analysts.