US natural gas futures surge on cold forecast for end of January

US natural gas futures jumped 13 per cent on Monday on weather forecasts calling for much colder weather through to the end of the month than were previously expected.  Buffalo News photo by John Hickey. 

US natural gas futures up over 15 per cent

On Monday, US natural gas futures rose over 15 per cent on weather forecasts calling for much colder temperatures through to the end of the month than were previously expected.

Meteorologists say the weather will become intensely cold by the weekend and remain frigid across much of the United States through to at least the end of January.

“This (weather) pattern could easily extend into February and bring several weeks of sustained cold and elevated heating demand, resulting in the largest storage withdrawals so far this season,” Reuters reports Daniel Myers, market analyst at Gelber & Associates in Houston, said in a report.

Myers added “The market will again feel pressure from low storage inventories in the coming weeks.”

Worsening forecasts and concerns about low natural gas inventories have jump-started the extreme volatility seen in the market at the end of 2018.

Front-month natural gas futures for February delivery on the New York Mercantile Exchange jumped to their highest since Dec. 28, rising 48.3 cents, or 15.6 per cent to $3.582 per million Btus by 1:58 p.m., EST.

The increase puts the contract on track for its biggest daily percentage gain in eight weeks.  As well, this is the second session in a row that saw an increase of over 5 per cent since the beginning of 2019.  An in the last two months of 2o18, the contract rose or fell over 5 per cent 25 times.

Volatile trading was due to changing weather forecasts and rising concerns about low natural gas stockpiles.  But warmer-than-expected weather in December and early January helped utilities cut their storage deficit from 21 per cent a few weeks ago to just 15 per cent currently.

Should the cold weather forecasts bear out, traders say utilities will have to start pulling massive amounts of natural gas out of storage to meet rising demand for heating.

The frosty forecasts have led Refinitiv to project natural gas demand in the contiguous United States to increase to 125.9 million billion cubic feet per day (bcf/d), up from Friday’s forecast of 124.5 bcf/d.

This week, natural gas demand is expected to hit 116.5 bcf/d.

Meanwhile, natural gas output in the Lower 48 averaged a near record high of 86.8 bcf/d over the past 30 days, according to data from Refinitiv.




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