A brutal cold snap, on top of concerns that the warm-up after it might not be as warm as previously projected, is giving the U.S. natural gas market a boost, Phil Flynn, a senior market analyst at the PRICE Futures Group, told Rigzone in an exclusive interview when asked why the U.S. natural gas price is rising today.
“On the production side, we’ve seen it rise and that is a bit of a concern for the bulls,” Flynn said, adding that, “on the flip side, this cold front shuts in some production that may offset some of those gains”.
Flynn told Rigzone that the demand for natural gas “is going to exceed records” and said “that should keep the market somewhat supportive”. He noted that the bears “continue to point to the possibility of … [a] glut because of the increases that we’ve seen in natural gas production across the United States”.
When Josh Garcia, a senior gas analyst at Energy Aspects, was asked why the U.S. natural gas price is rising today in a separate exclusive interview, he told Rigzone that “weather has shifted colder day on day (d/d), bringing the 15-day forecast closer to the 10 year normal”.
“Our weather model added 20 HDDs (heating degree days) d/d over the next two weeks, but some preliminary weather model runs reportedly added 66 HDDs d/d,” he added.
Garcia stated that “Lower 48 production is also lagging slightly, realizing at 103.4 billion cubic feet per day (bcfpd) today, down from prints around 104.0 bcfpd earlier in December”.
Frederick J. Lawrence, the ex-Independent Petroleum Association of America (IPAA) Chief Economist, told Rigzone in another exclusive interview that natural gas prices this week are reacting to a swath of colder weather in the Midwest in addition to continued signs of robust natural gas demand going into 2025.
“The December EIA STEO included strong language for natural gas demand; ‘we forecast the U.S. benchmark Henry Hub spot price will increase from an average of just over $2.00 per million British thermal units (MMBtu) in November to an average of about $3.00/MMBtu for the rest of the winter heating season’,” Lawrence highlighted to Rigzone.
“A prime driver of natural gas demand includes U.S. electricity consumption, which the EIA expects to reach all-time highs this year and then again in 2025,” he added.
“High electricity consumption joins a trend of steady and strong LNG exports which together will empower natural gas prices into the new year,” he continued.
Lawrence stated that the weather driver also remains important with colder weather systems in the Midwest, Ohio Valley, and East, in addition to low temperatures in North Texas, the South, and Southeast.
The ex-IPAA Chief Economist pointed out that natural gas storage remains above the five-year average.
Ole R. Hvalbye, Commodities Analyst at Skandinaviska Enskilda Banken AB (SEB), highlighted to Rigzone in another exclusive interview today that the Henry Hub price “rallied back to levels seen during the opening on Monday this week”.
Hvalbye said this move has been primarily supported by stronger than normal demand.
“Natural gas demand in the Lower 48 states rebounded to 104.8 bcfpd today after briefly dipping to near-normal levels, according to Bloomberg data,” he said.
“While near-term weather forecasts remain mixed, the week is expected to end with colder conditions before temperatures rise above normal across the U.S. next week, eventually normalizing on the East Coast within the 12-day range,” he added.
“Also, according to Bloomberg data, U.S. domestic natural gas production is estimated at 104.6 bcfpd today, slightly below last week’s average of 104.9 bcfpd,” he continued.
In a separate exclusive interview on Wednesday, Art Hogan, Chief Market Strategist at B. Riley Wealth, highlighted to Rigzone that natural gas was down yesterday “but held above key support of $3.00”, which he said “brought in buyers today”.
“The next resistance to watch out for is the $3.40 level, which has been an area of recent resistance,” he warned.
“If we can break above the $3.40 level, then it is possible that natural gas heads to the $4 level over the next several weeks,” he added.
“On the fundamental side, we have settled into more seasonally appropriate colder weather across most of the U.S., which should pick up demand,” Hogan went on to state.