WSJ
By
Timothy Puko
Feb. 20, 2015 5:12 p.m. ET
1 COMMENTS
Natural-gas prices surged to their highest closing price in nearly a month as severely cold weather boosts demand.
Half of U.S. homes use natural gas for heating fuel and, after several false starts, winter cold has finally become severe enough for long enough to create the kind of demand needed to absorb record supply.
Natural gas for March delivery, the front-month contract, rose 11.7 cents, or 4.1%, at $2.951 a million British thermal units on the New York Mercantile Exchange. It was the seventh gain in nine sessions and the highest closing price since Jan. 27. Prices are up 14% in the past two weeks.
Severe cold could be about to drive up demand for weeks. The U.S. government weather model shifted Friday, creating more agreement between computer weather models about the chance for extended, widespread cold, said Aaron Calder, senior market analyst at energy-consulting firm Gelber & Associates in Houston, in a note.
“The morning forecasts effectively erased the argument for a March warm-up and forced bearish traders to price in the potential for a long-term cold snap,” Mr. Calder 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 in the single digits as far west as Colorado, expanding the severe cold that has already settled over the Northeast and Midwest.
The Northeast was likely to set a record for demand on Friday, the U.S. Energy Information Administration said, citing data from consultants Bentek Energy. Regional demand had just hit a record Monday of 43.1 billion cubic feet, surpassing the high hit in January 2014, the EIA said.
The rush increased spot prices in some locations in New Jersey and Pennsylvania on Thursday.
Some analysts said it could push prices above $3 a million BTUs. Scott Gettleman, an independent trader in New York, said 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.”
Now that severely cold weather is driving demand for heating fuel, traders are now likely to shift their focus to large inventory withdrawals, Tudor, Pickering, Holt & Co., an energy investment bank in Houston, said in a note. That could feed the rally.
New data from the federal government shows money managers have been buying back into the market to close out bearish bets. Hedge funds, pension funds and others cut their positions that prices would fall by 6,538 in the week ended Tuesday, according to the Commodity Futures Trading Commission. That was more than six times the amount of bullish positions that money managers sold during the same time.
By
Timothy Puko
Feb. 20, 2015 5:12 p.m. ET
1 COMMENTS
Natural-gas prices surged to their highest closing price in nearly a month as severely cold weather boosts demand.
Half of U.S. homes use natural gas for heating fuel and, after several false starts, winter cold has finally become severe enough for long enough to create the kind of demand needed to absorb record supply.
Natural gas for March delivery, the front-month contract, rose 11.7 cents, or 4.1%, at $2.951 a million British thermal units on the New York Mercantile Exchange. It was the seventh gain in nine sessions and the highest closing price since Jan. 27. Prices are up 14% in the past two weeks.
Severe cold could be about to drive up demand for weeks. The U.S. government weather model shifted Friday, creating more agreement between computer weather models about the chance for extended, widespread cold, said Aaron Calder, senior market analyst at energy-consulting firm Gelber & Associates in Houston, in a note.
“The morning forecasts effectively erased the argument for a March warm-up and forced bearish traders to price in the potential for a long-term cold snap,” Mr. Calder 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 in the single digits as far west as Colorado, expanding the severe cold that has already settled over the Northeast and Midwest.
The Northeast was likely to set a record for demand on Friday, the U.S. Energy Information Administration said, citing data from consultants Bentek Energy. Regional demand had just hit a record Monday of 43.1 billion cubic feet, surpassing the high hit in January 2014, the EIA said.
The rush increased spot prices in some locations in New Jersey and Pennsylvania on Thursday.
Some analysts said it could push prices above $3 a million BTUs. Scott Gettleman, an independent trader in New York, said 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.”
Now that severely cold weather is driving demand for heating fuel, traders are now likely to shift their focus to large inventory withdrawals, Tudor, Pickering, Holt & Co., an energy investment bank in Houston, said in a note. That could feed the rally.
New data from the federal government shows money managers have been buying back into the market to close out bearish bets. Hedge funds, pension funds and others cut their positions that prices would fall by 6,538 in the week ended Tuesday, according to the Commodity Futures Trading Commission. That was more than six times the amount of bullish positions that money managers sold during the same time.
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