Analysts Explain Why USA Natural Gas Price is Rising

Analysts Explain Why USA Natural Gas Price is Rising
Why is the U.S. natural gas price rising today? That's the question Rigzone asked several analysts on Monday.
Image by Panama7 via iStock

Why is the U.S. natural gas price rising today? That’s the question Rigzone asked several analysts on Monday as the Henry Hub price ticked higher.

“For me, it seems mostly like a weather phenomenon,” Ole R. Hvalbye, a Commodities Analyst at Skandinaviska Enskilda Banken AB (SEB), told Rigzone, responding to the question.

“First, the recent updated weather forecasts pointed to colder than expected temperatures across much of the U.S., signaling a likely spike in heating demand as winter is just around the corner. This naturally increases the anticipated gas demand, thus pushing prices higher,” he added.

“At the same time, lower wind speeds were predicted - we have recently seen a similar effect in the EU, dubbed ‘dunkelflaute’ (low wind and solar output) - leading to reduced output from wind power generation,” he continued.

“As a result, natural gas fired power plants are picking up the ‘need’ to meet electricity needs, adding further upward pressure on gas prices,” Hvalbye went on to state, describing the development as a “double whammy”.

In addition, Hvalbye told Rigzone that storage levels have begun to show signs of decline as the heating season kicks in.

“Although inventories are still above the five-year average, the start of withdrawals has heightened concerns about future supply, contributing to the price increase,” he said.

“A combination of colder weather forecasts together with reduced renewable energy output, and the start of seasonal inventory drawdowns, all drive U.S. natural gas prices higher today,” Hvalbye concluded.

Offering his view, Phil Flynn, a Senior Market Analyst at the PRICE Futures Group, told Rigzone that natural gas is up “as production fell and expectations [are] that winter may be coming and may be turning this market both technically and fundamentally”.

“The EIA showed that, according to data from S&P Global Commodity Insights, the average total supply of natural gas fell by 1.1 percent (1.2 billion cubic feet per day) compared with the previous report week,” he added.

“Dry natural gas production decreased by 1.3 percent (1.4 Bcfpd) to average 101.8 Bcfpd, and average net imports from Canada increased by 2.2 percent (0.1 Bcfpd) from last week,” he highlighted.

“Yet, the EIA [showed] that total U.S. consumption of natural gas rose by 2.7 percent (2.0 Bcfpd) compared with the previous report week, according to data from S&P Global Commodity Insights,” he continued.

Also answering the question, Art Hogan, Chief Market Strategist at B. Riley Wealth, said the move in natural gas pricing today “looks to be weather related”.

“About … 16 percent of natural gas output remains offline in the aftermath of storm Rafael, the U.S. offshore energy regulator reported on Sunday,” Hogan told Rigzone.

“There were 310 million cubic feet of natural gas production shut-in on Sunday, offshore regulator Bureau of Safety and Environmental Enforcement (BSEE) reported,” he added.

In a statement posted on its website yesterday, the BSEE highlighted that it had activated its Hurricane Response Team and said it was monitoring offshore oil and gas operators in the Gulf of Mexico as they continue their response to storm Rafael.

“The BSEE team will work with offshore operators and other state and federal agencies until operations return to normal and the tropical storm is no longer a threat to Gulf of Mexico oil and gas activities,” the BSEE said in the statement.

“After the tropical storm has passed, facilities will be inspected. Once all standard checks have been completed, production from undamaged facilities will be brought back online immediately. Facilities sustaining damage may take longer to bring back online,” it added.

At the time of writing, the National Oceanic and Atmospheric Administration’s (NOAA) National Hurricane Center is no longer tracking storm Rafael on its website.

To contact the author, email andreas.exarheas@rigzone.com


What do you think? We’d love to hear from you, join the conversation on the Rigzone Energy Network.

The Rigzone Energy Network is a new social experience created for you and all energy professionals to Speak Up about our industry, share knowledge, connect with peers and industry insiders and engage in a professional community that will empower your career in energy.


MORE FROM THIS AUTHOR
Andreas Exarheas
Editor | Rigzone