U.S. natgas futures rise over 5 percent on cold forecasts

Mon Feb 24, 2014 8:55am EST

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Feb 24 (Reuters) - U.S. natural gas futures for March
climbed more than 5 percent early Monday to their highest level
since December 2008 on forecasts for continued cold before
paring gains later in the morning.
    MDA Weather Services forecast intense cold in the U.S.
North-Central over the next five days with another intense cold
shot over much of the country over the next six- to 10-days.
    Front-month natural gas futures on the New York Mercantile
Exchange were up 12.8 cents, or 2.09 percent, to $6.263
per million British thermal units at 8:38 a.m. EST (13:38 GMT).
    With the gains Monday morning, the front-month contract was
up about 53 percent since the beginning of the year.
    Traders however noted the price gains were mostly in the
front month and not the balance of the year and prices. They
said prices had to rise in the balance of the curve, especially
over the summer months, to encourage producers to drill for more
gas to help rebuild storage levels after this winter's record
draw.
    The balance of the year gas strip on the New York Mercantile
Exchange settled at $5.01 on Friday. Last week, the strip
reached $5.34, the highest level since June 2010. The summer of
2014, meanwhile, is trading at just $4.86.
    Inventories of natural gas are 40 percent below last year's
levels. The U.S. Energy Information Administration last week
reported a 250 billion cubic foot (Bcf) draw from storage
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.
    Nuclear plant outages, which create demand for natural gas
as a substitute fuel, were at 11,600 megawatts (MW) up from
9,600 MW on Friday. That compares with 16,700 MW a year ago and
a five-year average outage rate of 11,400 MW. 
    The number of rigs drilling for gas in North America rose by
five to 342 in the week to February 21, according to oil
services firm Baker Hughes. 

 (Reporting by Scott DiSavino; Editing by Chizu Nomiyama)
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