NEW YORK Jan 7 U.S. natural gas futures rose on Tuesday on expectations for a sharp storage drawdown after record cold temperatures triggered high demand for heating.
The coldest weather in almost two decades descended on the eastern two-thirds of the country, according to the National Weather Service, which expects the freeze to continue until midweek.
"Natural gas futures advanced ... as early expectations of an above-average storage withdrawal and the next couple days of arctic-like temperatures and elevated heating demands provide a boost to the market," said Addison Armstrong, senior director of market research at Tradition Energy.
Demand for natural gas hit an all-time high of 119 billion cubic feet on Monday, eclipsing the previous record set in January 2009, according to Thomson Reuters Analytics.
Storage drawdowns of natural gas during the week of Jan. 3 will be released Thursday by the U.S. Energy Information Administration. Early estimates from analysts ranged from 140 billion to 230 billion cubic feet, according to Reuters data.
Next week's report, which will report the drawdown during this week's record cold, will reflect the all-time high demand.
Private forecaster MDA Weather Services expects the current cold to lift, calling for a warm period in its six-to-10-day forecast, followed by a slightly cooler than previously expected outlook in the 11-to-15-day range.
Front-month February gas futures on the New York Mercantile Exchange were up 10 cents, or 2.3 percent, to $4.405 per million British thermal at 9:39 a.m. EST (1439 GMT).
At Henry Hub GT-HH-IDX, the benchmark supply point in Louisiana, gas rose 2 cents to $4.526. Early trade differentials were at a 12-cent premium over NYMEX, weakening over Friday's premium of 20 cents.
In the ICE cash market, gas on the Transco pipeline at the New York citygate E-TSCO6NY-IDX had not yet traded. On Monday, the pipeline traded as high as $90 per mmBtu on expected high demand in the Northeast. The average trade was $55, up $41 from Friday and the highest since at least 2001, the earliest year for which data is available.
The highest average had been more than $47 set in January 2004.
Several gas pipeline operators warned customers of a pinch in supply on Tuesday caused by the high demand from the cold weather.
In the power market, the PJM and Ercot grid operators urged customers to conserve power due to forecasts for high heating demand. In Texas, the demand for power set a new record for January on Monday.
Real-time power prices in the Midcontinent ISO, PJM and New York topped $1,500 per megawatt hour for at least several minutes earlier Tuesday.
That compares with average January prices in the $40s and $50s in PJM and the MISO over the past five years.
Last week's natural gas storage report revealed that stocks fell by 97 billion cubic feet during the week ended Dec. 27, according to EIA data released on Friday morning. That was smaller than the draw of 126 bcf forecast in a Reuters poll.
Some analysts pointed to gas freeze-offs that caused a decline of about 1.5 billion cubic feet per day over the last day or so in the Rockies, Midcontinent, Northeast and on the Gulf Coast shore.
Nuclear plant outages on Tuesday totaled 4,500 megawatts, or about 5 percent of U.S. capacity. That was up from Monday's total of 1,860 MW, but below the 8,900 MW out a year ago and the five-year average outage rate of 5,600 MW. (Editing by Lisa Von Ahn)