Authored by Gerson Freitas Jr. and Sergio Chapa. Printed by Bloomberg on August 23, 2022

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US natural gas prices tumbled after the operators of a key export terminal damaged in an explosion earlier this year announced a delay to the timeline for restart.

The Freeport liquefied natural gas terminal in Texas will begin initial production in early to mid-November, according to a statement Tuesday. Freeport LNG Development LP had previously said it was targeting a restart in October. The announcement means more gas will be available for domestic use to add to storage ahead of the winter, weighing on prices.

US gas futures slumped as much as 6.5% after earlier climbing to $10 per million British thermal units for the first time since 2008.

The gas market has been highly sensitive to any news of the restart timeline for Freeport, which accounted for almost a fifth of all overseas shipments of gas from the US before a blast in June knocked the terminal offline. Russia’s invasion of Ukraine has exacerbated a global gas supply crunch, sending buyers in Europe and Asia scrambling to snap up scarce LNG cargoes. The US sent nearly three-quarters of its LNG to Europe in the first four months of the year.

Before Tuesday’s Freeport announcement, gas futures had rallied on soaring prices in Europe and speculation that the terminal would restart as soon as October to help meet booming overseas demand for the heating and power-plant fuel. Dutch TTF gas futures, the European benchmark, have traded at roughly eight times the price for supplies in the US, creating an incentive for American suppliers to maximize exports. Freeport has capacity to process and ship 2 billion cubic feet a day of gas, or roughly 2% of US daily production.

US gas traded at Henry Hub, the national benchmark, “should unwind some of the previous support,” said David Seduski, an analyst at Energy Aspects. “We’ve seen a closer TTF-Henry Hub link this quarter so far than earlier in the summer, but this news should break that to a degree.”

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