UPDATE 2-U.S. natgas futures end week up 18 pct after hitting 5-year high

Fri Feb 21, 2014 4:25pm EST

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(Adds comment, more cash prices for gas, power and rig count)
    By Jeanine Prezioso
    NEW YORK, Feb 21 (Reuters) - U.S. natural gas futures edged
higher on Friday and rose nearly 18 percent for the week as a
severely depleted storage level and projections for yet another
bout of freezing weather boosted cash prices for next week.  
    A historically cold winter has eaten into gas supplies amid 
extraordinary heating demand, driving prices up by as much as 50
percent this year from $4.20 to $6.40 per million British
thermal units, the highest since late 2008.
    "It's been a monster move," said Jeff Grossman, president of
BRG Brokerage in New York. "This is a market that's going to be
hanging in there for awhile."
    On the New York Mercantile Exchange, March gas futures
 rose 7.1 cents to settle at $6.135 per mmBtu, after
earlier trading as high as $6.308. For the week, the front-month
contract rose 92 cents, or 17.6 percent. 
    Winter weather has yet to ease across much of the United
States, even as large cities saw a brief reprieve of warmer
temperatures this week.
    "The warm-up, albeit temporary, seems to have scared off the
weaker speculative length that came into the market late in the
game here," said John Kilduff, partner at Again Capital LLC in
New York.
    Forecasters at MDA Weather Services in Gaithersburg,
Maryland, are calling for "a far-reaching, intense late winter
cold snap" next week and into early March that will stretch from
East to West and into the southern states, with sub-zero
temperatures expected across the Northern tier of the country.
    Temperatures in Minneapolis, Minnesota, and St. Louis,
Missouri, are forecast to drop below zero (below minus 18
degrees Celsius) while in New York and Chicago, temperatures
will measure in the single digits and teens, MDA forecasters
said.
    Those forecasts led to dramatically higher spot prices for
gas for Monday delivery. In the Northeast, spot gas rose to the
low $20s per mmBtu and in the Midwest, gas jumped to the upper
$20s with the return of single-digit temperatures.  
    Rising spot prices supported the April future contract which
becomes the front-month contract next week, said Aaron Calder,
senior market analyst at Gelber & Associates in Houston. 
    "The front month has been largely weather dependent and the
cold start to March could very well bring April pricing to meet
cash prices," Calder said in a note. 
    Inventories of natural gas are 40 percent below last year's
levels. The U.S. Energy Information Administration reported a
250 billion cubic foot (Bcf) draw from storage on Thursday
marking a record fourth straight week of 200-Bcf plus draws. 
    Some analysts expect the nation to finish winter heating
season at the end of March with less than one trillion cubic
feet of gas stored underground, which would mark a more than
10-year low for that period. 
    Others say utilities will switch to coal for power
generation as coal prices remain below $3 on an energy
equivalent basis and producers will pump enough gas to replace
inventories in time for next winter.
    The recent price swings in the gas futures market have
shaken some investors out of the shale boom induced lull of the
past five years when prices dipped as low as $2, causing steep
losses for some this winter. 
    In the cash market, gas for Monday delivery at the benchmark
Henry Hub GT-HH-IDX gained 27 cents to average $6.21 per mmBtu
in late trade, an 8-cent premium to NYMEX futures.
    In New York, next-day prices on the Transco Zone 6 pipeline
E-TSCO6NY-IDX rose $1.03 to average $7.37 per mmBtu on the
IntercontinentalExchange.
    Gas for Chicago MC-CHICIT-IDX jumped $6.70 to average
$16.39 per mmBtu. For daily ICE U.S. cash gas prices, click
<0#GAS-IDX=ICE>.
    Power prices tracked higher fuel costs. New England power at
the Nepool E-NEPLMHP-IDX hub jumped $84 to an average of $208
per megawatt-hour in ICE trade, the highest in two weeks. PJM
West power E-PJWHRTP-IX in the mid-Atlantic gained $36 to $80
per MWh. 
    For daily ICE U.S. cash gas prices click on
<0#POWER-IDX=ICE>. 
    Nuclear plant outages, which create demand for natural gas
as a substitute fuel, were at 9,693 megawatts (MW), slightly
higher than the 9,437 MW on Thursday. That compares with 15,755
MW a year ago and a five-year average outage rate of 10,727 MW.
 
    The number of rigs drilling for gas in North America rose by
five to 342 in the week to Feb. 21, according to oil services
firm Baker Hughes. 

 (Additional reporting by Eileen O'Grady in Houston and Robert
Gibbons in New York; Editing by Bernadette Baum and Marguerita
Choy)
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