In an exclusive interview with Rigzone on Monday, Ole R. Hvalbye, a commodities analyst at Skandinaviska Enskilda Banken AB (SEB), said the \u201cmassive rise\u201d in U.S. natural gas prices today is \u201cprimarily driven by weather risk and thus tightening short-term balances, hence a continuation of the market movements we witnessed last week\u201d.<\/p>\n
Hvalbye highlighted in the interview that \u201cweather has re-entered the equation in force\u201d, noting that \u201cforecasts 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\u201d.<\/p>\n
\u201cThat has materially lifted heating demand expectations at a time when the market is already sensitive,\u201d he added.<\/p>\n
\u201cThis 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 \u2026 [around] $3 per MMBtu on January 16\u201d, he continued.<\/p>\n
Citing Bloomberg data, Hvalbye highlighted to Rigzone that around \u201c10 percent of U.S. gas production is estimated to be offline\u201d.<\/p>\n
\u201cAt the same time, LNG terminal feedgas flows dropped largely to 11.1 Bcfpd [billion cubic feet per day] yesterday and are estimated at \u2026 [around] 12.5 Bcfpd today, which is well below the 18.58 Bcfpd average last week,\u201d he said.<\/p>\n
Hvalbye went on to tell Rigzone that storage is adding some fuel to the move higher in U.S. natural gas.<\/p>\n
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\u201cU.S. inventories have been drawing faster than normal lately, and while stocks are not critically low, the drawdown rate has increased fast,\u201d he noted.<\/p>\n
Finally, Hvalbye told Rigzone that positioning is amplifying the price action.<\/p>\n
\u201cThe market was leaning bearish after a long period of low prices, and today\u2019s move has been intensified by short-covering (just like the spike last week),\u201d he said.<\/p>\n
\u201cTrading volumes have surged, suggesting that financial flows are accelerating what is fundamentally a weather-driven rally,\u201d he added.<\/p>\n
In a statement sent to Rigzone by the AccuWeather team on Sunday, AccuWeather warned of a \u201cmultibillion dollar\u00a0winter storm disaster\u201d in the Unites States.<\/p>\n
\u201cThe\u00a0rapidly expanding impacts from\u00a0freezing rain,\u00a0ice,\u00a0heavy\u00a0snow,\u00a0and dangerous cold\u00a0are\u00a0increasing the risk of life-threatening emergencies in areas without power\u00a0and heat as a massive\u00a0winter\u00a0storm spreads across the country,\u201d AccuWeather said in the statement.<\/p>\n
\u201cMore than 200 million people\u00a0across the U.S. are\u00a0being\u00a0impacted\u00a0by the winter storm,\u201d it added.<\/p>\n
In a winter weather situation report sent to Rigzone by the Texas Oil and Gas Association (TXOGA) on Sunday, the industry body said Texas\u2019 natural gas production, processing, transmission, and storage sectors \u201care operational and continue to have the needed production and storage for the delivery of natural gas\u201d.<\/p>\n
\u201cProduction reductions have occurred as anticipated with very challenging weather and road conditions,\u201d the report noted.<\/p>\n
\u201cOperators report varying impacts due to power outages, and road conditions particularly impacting third-party vendor access. Ground transportation challenges continue to persist; however, \u00a0improved operations are expected throughout the day as crews are able to resume operations,\u201d it added.<\/p>\n
\u201cTxDOT 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,\u201d it continued.<\/p>\n
\u201cOperators continue to work with electric transmission providers to address isolated outages and are expected to return to operations,\u201d it went on to state.<\/p>\n
The situation report stated that natural gas transmission and distribution systems \u201care experiencing stable pressures\u201d, adding that \u201cline packing is ensuring product delivery and storage is available\u201d.<\/p>\n
\u201cPreparedness and response protocols have been able to be implemented to ensure continued operations,\u201d the report noted.<\/p>\n
Highlighting Texas field conditions, the report said Permian, Delaware, Midland, Panhandle, and North Texas \u201care experiencing significant precipitation and extreme temperatures impacting road conditions\u201d.\u00a0<\/p>\n
\u201cKeeping 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,\u201d it said.<\/p>\n
\u201cPre-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,\u201d it added.<\/p>\n
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 \u201cto ensure that every necessary resource is made available to Texans\u201d.<\/p>\n
A letter of transmittal, which accompanied the release, noted that Abbott issued \u201ca proclamation declaring a disaster due to severe winter weather in a number of Texas counties\u201d.<\/p>\n
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, \u201cpursuant 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\u201d.<\/p>\n
\u201cDuring 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\u201d, the notice said.<\/p>\n
\u201cThese 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,\u201d it added.<\/p>\n
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.<\/p>\n
\u201cOvernight, 164 people sought refuge in one of 20 Red Cross\u2013managed shelters, while more than 900 Houstonians stayed in Red Cross\u2011supported partner warming centers and shelters across Harris County,\u201d the TGRC stated.<\/p>\n
\u201cLife safety remains our top priority as extreme cold continues across the region. We urge residents to follow guidance from local officials and emergency managers,\u201d it added.<\/p>\n
\u201cRed Cross teams are managing shelters, delivering supplies to independent and partner\u2011run sites, and providing essential resources-including blankets, cots, and comfort items-to help local jurisdictions meet community needs,\u201d it continued.<\/p>\n
To contact the author, email\u00a0andreas.exarheas@rigzone.com<\/a><\/p>\n
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