Natural gas futures surged to $5 for the first time in more than three years as frigid weather spurred demand and sent U.S. stockpiles tumbling.
Gas has jumped 42 percent since the start of the U.S. heating season in November. January is on track to be the coldest month in the lower 48 states of this century, according to Commodity Weather Group LLC. U.S. inventories of the heating and power-plant fuel dropped by 1.411 trillion cubic feet in the 10 weeks ended Jan. 17, 43 percent above five-year average declines for the period, government data show.
“We’re a market right now that is focused pretty exclusively on the cold-weather shock,” said Brison Bickerton, head of strategy at Freepoint Commodities LLC in Stamford, Connecticut. “People have forgotten a little how powerful winter weather can be.”
Natural gas for February delivery rose 27.3 cents, or 5.8 percent, to $5.003 per million British thermal units at 10:57 a.m. on the New York Mercantile Exchange after jumping to $5.008, the highest intraday price since June 21, 2010. Trading volume was 70 percent above the 100-day average. The futures have surged 45 percent this month, the biggest gainer in the Standard & Poor’s GSCI index of 24 commodities.
Chicago was colder than the South Pole at the start of January as energy consumption rose and gas production sites reported disruptions because of freezing conditions.
A deficit of U.S. stockpiles versus the five-year average widened to a record this month. Spot gas prices for delivery in New York City and New England jumped to all-time highs this week amid surging demand and pipeline constraints.
Four of the top 10 coldest days of the 21st century in the contiguous U.S. states occurred this month, said Matt Rogers, president of Commodity Weather Group in Bethesda, Maryland.
About 49 percent of U.S. households use gas for heating, according to the U.S. Energy Information Administration, the Energy Department’s statistical arm.
Extremely cold weather means “the market is going to be less supplied at the end of the winter and that leaves the door open for more price gains,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York,
Goldman Sachs Group Inc. cut its end-of-March inventory projection to 1.388 trillion cubic feet from an earlier outlook of 1.605 trillion, Samantha Dart, a London-based analyst with the bank, said in a Jan. 20 note to clients. Lower stockpile levels with average weather in February and March mean gas prices may be closer to $4.40 to $4.50 this year compared with the bank’s current forecast of $4.25, she said.
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