US gas market heads for biggest weekly gain since February 2014

By NAUREEN S. MALIK
Bloomberg

Natural gas futures are staging the biggest rebound this week since February 2014 on speculation that a seasonally cool start to January will stoke demand after an unusually mild December.

The Northeast and Midwest will see seasonal temperatures Jan. 3 through Jan. 7 following an unusually warm December, said Commodity Weather Group. Manhattan’s high on Thursday set a record when it passed 63 Fahrenheit (17 Celsius) and may reach 73 degrees, 33 above normal, before sliding to 37 on Jan. 6, AccuWeather said.

“The market is continuing higher with some weather forecasts calling for below-normal temperatures in early January,” said Kyle Cooper, director of research with IAF Advisors and Cypress Energy Capital Management. “While the temperatures are not extreme, it’s a significant shift from the well-above-normal temperatures currently encompassing the country.”

Gas futures for January delivery rose 4.4 cents, or 2.2%, to $2.027/MMBtu at 9:32 a.m. on the New York Mercantile Exchange. Prices jumped back above $2 in after-market trading on Wednesday for the first time in two weeks. The market will be closed Friday in observance of Christmas.

Futures Rebound

The futures have rebounded 15% this week, heading for the biggest gain since February 2014. As forecasts for January turned cooler, the number of heating degree days, a measure of energy demand based on population, rose to 883 from 870 in Monday’s outlook, “and there’s a chance we could increase a bit more early next week,” Matt Rogers, president of Commodity Weather in Bethesda, Maryland, said in an e-mail.

Last week, concern mounted that mild weather could extend farther into winter. The warmest December since 1950, based on heating degree days, helped drive prices to a 16-year low. The number of HDDs is on track to to end the month at 627, “way below” last year’s level of 766 and the 10-year average of 850, Rogers said.

Gas inventories are hovering at record highs for this time of the year in US Energy Information Administration data going back to 1994. Storage levels totaled 3.846 trillion cubic feet on Dec. 11, 9.1% above the five-year average.

Inventory Report

An EIA report scheduled for release at 10:30 a.m. in Washington probably will show that stockpiles fell by 26 billion cubic feet last week, based on the median of 17 analyst estimates compiled by Bloomberg. Estimates were for declines ranging from 13 billion to 40 billion. The five-year average withdrawal for the period is 120 billion.

The pace of withdrawals will accelerate in the next three reports, jumping to as much as 157 billion in the week ending Jan. 6 based on colder weather in January, Tim Evans, an energy analyst at Citi Futures Perspective in New York, said in note to clients late Wednesday.

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