GAS PRICES RISE
Natural gas prices are surging in their biggest move in a week as severely cold weather boosts demand and pushes prices to a three-week high.
Natural gas for March delivery recently was up 12.7 cents, or 4.5%, at $2.961 a million British thermal units on the New York Mercantile Exchange. It would be the seventh gain in nine sessions.
Power plants have been consuming more gas, helping to balance an oversupplied market, Tudor, Pickering, Holt & Co., an energy investment bank in Houston, said in a note. Now, severely cold weather is driving demand for heating fuel, too, and traders could bid prices up to $3/mmBtu for the first time in a month, the bank said.
An Alberta clipper is likely to push Arctic cold over the northern tier of the country next week, with severely cold weather covering most of the country, according to Weather Services International in Andover, Mass. The agency predicts temperatures below freezing as far south as Dallas and temperatures in the single digits as far west as Colorado, expanding the severe cold that's already settled in over the Northeast and Midwest.
Half of U.S. homes use natural gas heat, which is likely to help set a record for demand in the Northeast on Friday, the U.S. Energy Information Administration said, citing data from consultants Bentek Energy. Regional demand had hit a record Monday of 43.1 billion cubic feet, surpassing the record from January 2014's historic polar vortex cold front, EIA said.
The rush has spiked local spot prices to as high as $80/mmBtu for the Transco Z6 delivery points in New Jersey and Pennsylvania on Thursday. Cash prices at the Transco Z6 in New York traded in a bid-ask range of $8.50/mmBtu to $20.00/mmBtu, compared with Thursday's range of $17 to $35.
The surge in futures could bring more traders into the market, said Scott Gettleman, an independent trader in New York. He expected prices to keep rallying Friday, saying the move should have started earlier this week.
"We all knew the weather was coming," he said. "It's not a surprise. I've been wondering about this for days."
Prices had stayed in a 33-cent range this month, likely a delayed effect from mild weather in late January and early February, analysts said. Above-normal temperatures had led to a series of far-below-normal storage withdrawals in recent weeks, raising expectations that a healthy supply cushion would suppress prices.
Now the surge of cold and home heating demand have led analysts to lower their expectations for the amount of gas in storage by the end of the winter, likely feeding the rally, Tudor, Pickering said. Macquarie Group Ltd. said Thursday that it cut its forecast for the amount of gas in storage by April 1 to 1.6 trillion cubic feet, down from 1.7 trillion.
Physical gas for next-day delivery at the Henry Hub in Louisiana last traded at $3.07/mmBtu, compared with Thursday's range of $2.925-$3.00.
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