Natural-Gas Prices Spike as Forecasts Turn Colder Again
Published: Feb 18, 2014
--March contract up nearly 5% as traders anticipate another bout of frigid weather
--Prices rise 20% from last week's low
--Inventories already at a 10-year low
By Christian Berthelsen
NEW YORK--Natural-gas futures jumped Tuesday as advance weather reports reflected another coming cold front after this week's warm-up, leading traders to anticipate another spike in demand.
Gas for March delivery was up 24.5 cents to $5.4590 a million British thermal units on the New York Mercantile Exchange, after climbing to $5.559/mmBtu in early trade. Prices have risen nearly 20% off their recent lows a week ago and stand within striking distance of the four-year high set earlier this month.
Natural gas is a key component in heat generation, and demand rises as weather turns cold. As the March contract wanes and the end of the winter season approaches, the market had been anticipating a turn toward warmer weather. Prior weather forecasts had called for a sustained warming trend beginning this week and into next month, but new reports Tuesday revised that outlook and said another cold blast is on the way for much of the northern U.S. through the end of the month and into next.
Gas inventory levels are already at a 10-year low after a severe winter in many parts of the country, and traders expect more cold weather will further reduce supplies. Analysts are expecting another large withdrawal from inventories in weekly U.S. government data to be released Thursday.
"It's no surprise that forecasts for below- to well-below-normal temperatures across the East next week and severely depleted storage levels are providing a boost to the market," Addison Armstrong, an analyst with brokerage Tradition Energy, said in a note.
Natural gas for next-day delivery at benchmark Henry Hub in Louisiana recently traded at $5.71/mmBtu, according to IntercontinentalExchange, versus Friday's average of $5.5360/mmBtu. Natural gas for next-day delivery at Transcontinental Zone 6 in New York traded at $6.20/mmBtu, compared with $8.9248/mmBtu Friday.
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