NEW YORK Jan 29 U.S. natural gas futures rose
more than 10 percent on Wednesday, the biggest daily gain in 18
months as volatility continued to rock the market ahead of the
February contract expiration.
Front-month futures surged above $5.55 per million
British thermal units, a four-year high, in part due to short
covering and as continuing cold weather across the nation
boosted heating demand.
March futures also rose more than 10 percent, but
remained below February -- a further sign that February futures
were in high demand by traders covering short positions, said
Dominick Chirichella, an analyst at Energy Management Institute
"There hasn't been any change in the weather forecasts from
yesterday afternoon to today's close. I believe this is a
technical move," said Chirichella. "Some people got caught short
before the expiration."
Market watchers attributed some of the run-up in near-month
natural gas prices to some investors possibly being forced to
liquidate positions. Betting on March's price against April is a
popular trade among hedge funds and the spread blew out to
nearly $1 from 54 cents on Tuesday.
Temperatures far below normal have plagued Midwest and
eastern U.S. this winter, drawing unusually high levels of
natural gas from storage to be used as fuel for heat.
Private forecaster Commodity Weather Group expects frigid
temperatures in much of the country over the next two weeks.
Front-month natural gas futures on the New York Mercantile
Exchange closed up 52.4 cents, or 10.41 percent, at
The February contract rose 31 percent since the beginning of
January, the largest one-month gain for a front-month contract
since September 2009.
In the ICE cash market, trades for gas to be delivered
Thursday at Henry Hub , the benchmark supply point in
Louisiana, closed down 3 cents at $5.20. Late trades were at a
35-cent discount to NYMEX, reversing course from a 20-cent
Gas on New York's Transco Zone 6 pipeline
fell $15.54 to $14.66 the region's near term forecast turned
Front-month futures have been extremely volatile over the
past week, gaining more than 10 percent on Friday and falling
more than 5 percent on Monday.
Implied volatility over the last 30 days reached 83 on
Friday, the highest since September 2009. On Tuesday, it fell to
73, still within levels not seen since 2009.
Storage withdrawals for the week ended Jan. 24 are expected
to be between 220 billion and 280 billion cubic feet, according
to analysts polled by Reuters. The U.S. Energy Information
Administration will release the data on Thursday.
Nuclear plant outages, which create a draw on natural gas as
a substitute power source, were at about 2,500 megawatts, down
slightly from 2,600 MW on Tuesday. That compares with 7,600 MW
out a year ago and a five-year average outage rate of 5,600 MW.