Why is the U.S. natural gas price rising today?
That was the question Rigzone asked Phil Flynn, a senior market analyst at the PRICE Futures Group, in an exclusive interview on Friday.
In response, Flynn told Rigzone that Thursday’s natural gas injection “was right in line” and added that “now we are getting forecasts indicating colder conditions for late October and early November”, which he outlined “have led to increased purchasing activity in major U.S. regions, including the Midwest and Northeast”.
“We saw initial weather models suggested a return of warmer temperatures, momentarily dampening the rally. Subsequent projections of below-normal temperatures have renewed bullish market sentiment,” Flynn added.
“This trend is consistent with global developments. Cold weather across Europe and Asia is reducing inventories, with European stocks declining by 11 percent since early October and supporting elevated benchmark prices such as Henry Hub,” he continued.
In its latest weekly natural gas storage report, which was released on Thursday and included data for the week ending October 24, the U.S. Energy Information Administration (EIA) noted that working gas in storage was 3,882 billion cubic feet as of October 24, according to its estimates.
“This represents a net increase of 74 billion cubic feet from the previous week,” the EIA said in that report.
“Stocks were 29 billion cubic feet higher than last year at this time and 171 billion cubic feet above the five-year average of 3,711 billion cubic feet. At 3,882 billion cubic feet, total working gas is within the five-year historical range,” it added.
When he was asked why the U.S. natural gas price is rising today in a separate exclusive interview on Friday, Art Hogan, Chief Market Strategist at B. Riley Wealth, pointed out that “U.S. natural gas futures successfully tested the important support level of $3.27 earlier this week and now has risen past $4.1 per MMBtu [million British thermal units], the highest in seven months”.
“Expectations of colder weather in the U.S. ahead of the winter supported demand for gas-intensive heating. Meanwhile, the average flow of gas to the eight big U.S. LNG export plants were at 16.5 billion cubic feet per day in October, well above the 15.7 billion cubic feet per day from the previous month to set up a fresh record ahead of the turn of the month,” he added.
Hogan went on to state that “high LNG flows were aligned with added demand from Europe as the gradual shun of Russian gas coincided with lower stocks in gas trading hubs, while the U.S. Presidential administration pressed for pledges of U.S. energy imports for Asian countries negotiating trade deals”.
In an EBW Analytics Group report sent to Rigzone by the EBW team on Friday, Eli Rubin, an energy analyst at the company, said the December natural gas contract “is nearing technical resistance at the 100-day moving average of $4.13 per MMBtu for the first time since June, with the market transitioning away from storage oversupply fears toward a robust structural winter narrative”.
“Fundamentally, though, the near to medium term remains very well supplied,” Rubin said in that report.
Rubin highlighted in this report that “daily LNG is skyrocketing, with early-cycle nominations smashing record highs by 0.6 billion cubic feet per day”.
“Strong Gulf Coast demand drove Henry Hub spot prices to $3.45 per MMBtu – the highest level since mid-July,” he added.
In the report, Rubin went on to state that “December contract strength, despite this week’s 25 billion cubic foot bearish weather shift and storage on track to surpass 3,950 billion cubic feet, signals upside momentum – and risks that early-winter optimism may exceed fundamentals”.
“While higher supply and technical resistance may slow upside … momentum appears quite strong into November,” he said.
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