Analyst Explains ‘Massive Rise’ in USA NatGas Prices Today

In an exclusive interview with Rigzone on Monday, Ole R. Hvalbye, a commodities analyst at Skandinaviska Enskilda Banken AB (SEB), said the “massive rise” in U.S. natural gas prices today is “primarily driven by weather risk and thus tightening short-term balances, hence a continuation of the market movements we witnessed last week”.

Hvalbye highlighted in the interview that “weather has re-entered the equation in force”, noting that “forecasts show a broad cold spell across large parts of the U.S., particularly the Midwest and East, with temperatures as low as 10 degrees below the 30-year normal for the end of this week”.

“That has materially lifted heating demand expectations at a time when the market is already sensitive,” he added.

“This is clearly reflected in Henry Hub, which has jumped to another level, and is now trading around $6.2 per MMBtu [million British thermal units], up more than 100 percent from … [around] $3 per MMBtu on January 16”, he continued.

Citing Bloomberg data, Hvalbye highlighted to Rigzone that around “10 percent of U.S. gas production is estimated to be offline”.

“At the same time, LNG terminal feedgas flows dropped largely to 11.1 Bcfpd [billion cubic feet per day] yesterday and are estimated at … [around] 12.5 Bcfpd today, which is well below the 18.58 Bcfpd average last week,” he said.

Hvalbye went on to tell Rigzone that storage is adding some fuel to the move higher in U.S. natural gas.

“U.S. inventories have been drawing faster than normal lately, and while stocks are not critically low, the drawdown rate has increased fast,” he noted.

Finally, Hvalbye told Rigzone that positioning is amplifying the price action.

“The market was leaning bearish after a long period of low prices, and today’s move has been intensified by short-covering (just like the spike last week),” he said.

“Trading volumes have surged, suggesting that financial flows are accelerating what is fundamentally a weather-driven rally,” he added.

In a statement sent to Rigzone by the AccuWeather team on Sunday, AccuWeather warned of a “multibillion dollar winter storm disaster” in the Unites States.

“The rapidly expanding impacts from freezing rain, ice, heavy snow, and dangerous cold are increasing the risk of life-threatening emergencies in areas without power and heat as a massive winter storm spreads across the country,” AccuWeather said in the statement.

“More than 200 million people across the U.S. are being impacted by the winter storm,” it added.

In a winter weather situation report sent to Rigzone by the Texas Oil and Gas Association (TXOGA) on Sunday, the industry body said Texas’ natural gas production, processing, transmission, and storage sectors “are operational and continue to have the needed production and storage for the delivery of natural gas”.

“Production reductions have occurred as anticipated with very challenging weather and road conditions,” the report noted.

“Operators report varying impacts due to power outages, and road conditions particularly impacting third-party vendor access. Ground transportation challenges continue to persist; however,  improved operations are expected throughout the day as crews are able to resume operations,” it added.

“TxDOT is responding to road assistance requests. Localized and intermittent power outages have occurred in the Permian, Panhandle, Midland, and Delaware production areas, and most have been short lived,” it continued.

“Operators continue to work with electric transmission providers to address isolated outages and are expected to return to operations,” it went on to state.

The situation report stated that natural gas transmission and distribution systems “are experiencing stable pressures”, adding that “line packing is ensuring product delivery and storage is available”.

“Preparedness and response protocols have been able to be implemented to ensure continued operations,” the report noted.

Highlighting Texas field conditions, the report said Permian, Delaware, Midland, Panhandle, and North Texas “are experiencing significant precipitation and extreme temperatures impacting road conditions”. 

“Keeping personnel safety as a priority, it is reported that crews and third-party vendors continue to work throughout the storm adjusting start times as road clearing allows for safe conditions,” it said.

“Pre-positioned personnel and staffing onsite are responding as issues arise to keep operational consistency allowing for product flow, processing and line pack continue to ensure the production, transmission and storage systems can continue to deliver needed product,” it added.

A release posted on the website of the Office of the Texas Governor on January 22 announced that Texas Governor Greg Abbott had issued a disaster declaration for 134 counties “to ensure that every necessary resource is made available to Texans”.

A letter of transmittal, which accompanied the release, noted that Abbott issued “a proclamation declaring a disaster due to severe winter weather in a number of Texas counties”.

In a notice posted on its website on January 23, the Texas Railroad Commission (RRC) noted that Abbott issued a proclamation declaring a state of disaster for several Texas counties due to severe winter weather and pointed out that, “pursuant to this declaration and Section 418.016 of the Texas Government Code, the Office of the Governor has authorized the suspension of certain regulatory statutes and rules that may prevent, hinder, or delay necessary action in coping with this disaster”.

“During this state of disaster, licensed companies and certified individuals involved in the safe transportation, storage, and distribution of LPG, CNG, and LNG may request waivers for specific regulatory requirements from the Railroad Commission of Texas”, the notice said.

“These waiver requests will be reviewed on a case by case basis and may include companies with licenses that expired during the disaster period or emergency registration for alternative fuel transport units,” it added.

In a statement sent to Rigzone late Sunday, the Texas Gulf Coast Red Cross (TGRC) said it was actively supporting communities impacted by the storm through sheltering, feeding, and logistics operations in coordination with state, county, and local partners.

“Overnight, 164 people sought refuge in one of 20 Red Cross–managed shelters, while more than 900 Houstonians stayed in Red Cross‑supported partner warming centers and shelters across Harris County,” the TGRC stated.

“Life safety remains our top priority as extreme cold continues across the region. We urge residents to follow guidance from local officials and emergency managers,” it added.

“Red Cross teams are managing shelters, delivering supplies to independent and partner‑run sites, and providing essential resources-including blankets, cots, and comfort items-to help local jurisdictions meet community needs,” it continued.

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