by Andreas Exarheas |RigZone.com| U.S. natural gas is dipping back on the fact that the weather forecast is warming up in the U.S. and Europe.That’s what Phil Flynn, a senior market analyst at the PRICE Futures Group, told Rigzone in an exclusive interview on Tuesday when asked why the U.S. natural gas price has dropped lately.
Flynn added that, “at the same time, the longer end of the curve is reacting to a potential shift in expectations for longer term power demand”.
“China’s DeepSeek breakthrough has long term power predictors going back to the drawing board,” Flynn went on to note.
In a statement sent to Rigzone earlier today, Antonio Di Giacomo, a senior market analyst at XS.com, highlighted “the release of the DeepSeek R1 artificial intelligence model, developed by the Chinese start up DeepSeek”, adding that the announcement of DeepSeek R1 “caused a stir in the tech market”.
In another exclusive interview on Tuesday, Josh Garcia, a senior gas analyst at Energy Aspects, told Rigzone, “we have just experienced a historically cold January that potentially had the largest single weekly withdrawal in Energy Information Administration (EIA) history and the largest total monthly withdrawal as well”.
“Now that the forecast has shifted significantly warmer, lower Henry Hub prices are simply a function of stockout risk exiting the market,” he added.
“The weather explains the prompt move. The back of the Henry Hub curve sold off due to the DeepSeek news, which may or may not erode a lot of data center demand over the coming decade, as well as a reaction to the Trump administration pausing federal grants,” he continued.
Frederick J. Lawrence, the ex-Independent Petroleum Association of America (IPAA) Chief Economist, told Rigzone in a separate exclusive interview today that upcoming weather trends and contract expiry are both playing a role in declining natural gas prices over the past week.
“February weather forecasts are looking at warmer weather trends for most of the U.S. aside from colder temperatures in the northern plains, northwest, and northeast,” Lawrence said.
“This is a significant turnaround from a very cold January that brought hibernal weather to the south, but La Nina still has the potential to disrupt the jet stream in the month ahead,” he added.
“In addition, the expiration of the February 2025 contracts (settlement on 29 January) has also helped dampen prices of late,” Lawrence continued.
In another exclusive interview today, Art Hogan, Chief Market Strategist at B. Riley Wealth, told Rigzone that “U.S. natural gas futures dropped below $3.65 per million British thermal units (MMBtu), near a three-week low, due to warmer than expected weather forecasts for early February”.
“Weekend updates predicted milder conditions across much of the U.S. from February 1-5, reducing anticipated heating demand,” he added.
“Consensus estimates still expect a 317 billion cubic feet gas withdrawal for the week ending January 24, which could eliminate the gas inventory surplus for the first time since early 2022,” Hogan went on to state.
“Meanwhile, LNG exports are increasing, helped by the restart of Freeport LNG’s Texas facility,” he continued.
The U.S. EIA’s next weekly natural gas storage report, which will include data for the week ending January 24, is scheduled to be released on January 30.
The EIA’s latest weekly natural gas storage report at the time of writing, which was released on January 23 and includes data for the week ending January 17, stated that “working gas in storage was 2,892 billion cubic feet as of Friday, January 17, 2025, according to EIA estimates”.
“This represents a net decrease of 223 billion cubic feet from the previous week. Stocks were 57 billion cubic feet less than last year at this time and 21 billion cubic feet above the five-year average of 2,871 billion cubic feet,” the EIA’s latest report added.
“At 2,892 billion cubic feet, total working gas is within the five-year historical range,” it continued.
According to its January STEO, which was released on January 14 and completed its forecast on January 9, the EIA expects the Henry Hub spot price to average $3.21 per MMBtu in the first quarter of 2025 and $3.14 per MMBtu overall this year.
Flynn is described on the PRICE Futures Group website as “one of the world’s leading energy market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets”. Flynn is also a daily contributor to Fox Business Network, the site highlights.
According to its website, the PRICE Futures Group’s mission is to “provide traders and investors with industry-leading trading solutions, informative market analysis, and cutting-edge technologies which enable efficient decision-making”.
B. Riley Wealth’s website notes that Hogan’s “distinguished financial industry career spans 30+ years, during which he has concentrated on the U.S. equity markets”. The site points out that Hogan has served as a member of the Board of Governors of Boston Stock Exchange, Inc., and a member of the Board of Directors of NASDAQ OMX BX, Inc.
B. Riley Wealth offers a world-class wealth management and financial planning platform designed to provide clients with a full suite of services including brokerage, investment management, insurance and tax preparation services, B. Riley’s website states.
Energy Aspects highlights on its site that it offers “deep, sector-specific insights and analysis of the macro developments that guide market players”. Over 600 organizations, including oil majors, producers, refiners, trading houses, governments, hedge funds and utilities, rely on the company’s intelligence and data, according to the site.
To contact the author, email andreas.exarheas@rigzone.com
