The price of U.S. natural gas is likely being driven by a combination of both technical and fundamental drivers.
That’s what Art Hogan, Chief Market Strategist at B. Riley Wealth, told Rigzone in an exclusive interview on Monday when asked why the U.S. natural gas price is dropping today.
“On the fundamental side, according to AccuWeather reports, most locations this upcoming week will observe high temperatures between 10-15 degrees Fahrenheit above the historical average for late February,” Hogan said.
“Technically, the movements of the natural gas futures confirm this bearish pressure as the upside seems to be capped at last week’s high at $4.476, followed by a sharp sell-off that resulted in a weekly close at $4.234 after testing the week’s low at $3.554,” he added.
When asked the same question in a separate exclusive interview on Monday, Phil Flynn, a senior market analyst at the PRICE Futures Group, said, “despite the fact that we saw a major drop in natural gas inventories and the fact that we’re further below the five year average than we have been probably in almost in two years, the hope of spring is giving the market a bit of a sell off – despite the strong technical breakout of last week”.
“The warmer temperatures are raising hopes that winter is coming to an end, and the demand will start to ease off and production will rise,” he added.
In the interview, Flynn went on to tell Rigzone that “the key for this market will be what happens in March after the warm-up”.
“There are still some forecasters that are calling for a return to arctic-like temperatures into March, and if that does happen it’s going to create an interesting dynamic for this market and the ‘flip side’ that the ability of U.S. natural gas producers to ramp-up production could keep a lid on those prices if it doesn’t get cold,” Flynn told Rigzone.
In another exclusive interview on Monday, Frederick J. Lawrence, the ex-Independent Petroleum Association of America (IPAA) Chief Economist, told Rigzone that “forecasts of warmer spring weather have weakened natural gas prices at the start of the week”.
“This warming trend comes right before expiration this Wednesday,” he added.
“Prices had been higher due to an arctic blast impacting the eastern part of the U.S. last week. The groundhog did see a longer winter this year, so the weather story likely remains unfinished,” he continued.
“Despite this latest warming trend, overall market fundamentals for natural gas remain quite strong,” Lawrence went on to state.
In the interview, Lawrence highlighted to Rigzone that the U.S. Energy Information Administration’s (EIA) natural gas weekly update for the week ending February 19, “showed natural gas consumption up 10.5 percent, or 11 billion cubic feet per day, compared with the previous report week”.
In an additional exclusive interview today, Ole R. Hvalbye, Commodities Analyst at Skandinaviska Enskilda Banken AB (SEB), told Rigzone that Henry Hub “has retraced some of the gains observed last week, as warm weather is expected to limit demand this week, while recovering domestic production is helping to mitigate the impact of strong LNG exports”.
“Temperatures in the Lower 48 states are forecasted to be above normal in the coming week. The 10-12 day outlook shows ‘normal-ish’ temperatures across most of the country,” he added.
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