By OGJ editors
HOUSTON, Jan. 30 -- Frigid temperatures across much of the US triggered surprisingly high spot natural gas prices for contracts for February delivery, and traders reported concerns about anticipated dwindling gas inventory numbers heading into spring.
Natural gas prices for February delivery on the New York Mercantile Exchange Wednesday shot up by 21.6¢ to reach $5.66/Mcf as that month's contract expired. The surge marked the continuation of a trend in rising natural gas spot prices, which jumped the week ended Jan. 24 as major US heating regions experienced some of the coldest conditions in more than 6 years.
"Few should have been surprised to see spot prices eclipse the $5/MMbtu mark," said UBS Warburg LLC analyst Ronald Barone in a Jan. 23 research note. He received multiple reports of intraday Northeast spot deliveries selling for $15-22/MMbtu.
Although frigid temperatures pushed some US furnaces into overdrive, recently released forecasts suggest milder days ahead, however.
The US National Weather Service's midterm outlook calls for temperatures throughout much of the US to average normal or above normal, while readings in the Southeast are expected to average below normal, Barone said.
But traders still expect near-term price pressure, noting that natural gas stocks are dropping fast because of the cold winter. Energy Information Administration figures released Thursday showed a 247 bcf stock draw for the week ended Jan. 24.
Oil prices: a gas market factor
Strong NYMEX crude oil prices also are helping to support gas prices, traders said.
The March contract for benchmark US light, sweet crude jumped by 96¢ to $33.63/bbl Wednesday, while the April position gained 89¢ to $32.71/bbl for the same day.
Oil traders were reacting to the weekly inventory reports by the American Petroleum Institute and the EIA.
EIA said the nation's crude oil stocks declined by 500,000 bbl for the week ended Jan. 24, while gasoline inventories were lower by 3.3 million bbl. Distillate stocks pulled back by 6.8 million bbl.
API estimated that crude stocks increased by 232,000 bbl, while gasoline and distillate inventories fell by 3.31 million and 7.45 million bbl, respectively.
Meanwhile, Barone called his first quarter natural gas forecast of $4.10/MMbtu conservative, adding that odds are increasing that Apr. 1 storage levels will fall below 1 tcf. Other revised forecasts are calling for steeper declines in North American deliverability.
Meanwhile, in London Wednesday, North Sea Brent crude oil futures prices also settled higher on the International Petroleum Exchange. IPE March Brent futures settled at $31.02/bbl, up 75¢. The natural gas contract climbed slightly, up 4¢ to the equivalent of $3.25/Mcf on IPE.
