15 January 2019, News Wires — U.S. natural gas futures soared more than 11 percent on Monday on forecasts for much colder weather through the end of January than previously expected, sparking a return to the extreme volatility seen at the end of last year.
In their latest predictions, meteorologists said the weather would turn intensely cold starting around Jan. 19 and remain frigid across much of the country through at least the end of the month.
Front-month gas futures for February delivery on the New York Mercantile Exchange were up 35 cents, or 11.3 percent, at $3.449 per million British thermal units at 9:42 a.m. EST (1442 GMT), their highest since Dec. 28.
That puts the contract on track for its biggest daily percentage gain in eight weeks.
With more cold coming, Refinitiv projected demand for gas in the Lower 48 states would rise to 125.9 billion cubic feet per day (bcfd) next week, up from a forecast 124.5 bcfd on Friday.
That compares with an expected 116.5 bcfd this week.
The cold forecasts have revived the extreme market volatility seen at the end of last year with the contract moving over 5 percent during the past two trading sessions after languishing below that level since the start of the new year.
In the last two months of 2018, the contract rose or fell by more than 5 percent 27 times.
Traders said intense volatility late last year was due to a combination of changing weather forecasts and concerns about low stockpiles.
But weeks of warmer-than-usual weather in December and early January have allowed utilities to cut the vast storage deficit from 21 percent a few weeks ago to just 15 percent now by leaving more fuel in underground storage facilities.
However, if the cold expected next week materializes, utilities will have to start pulling massive amounts of gas out of storage again to meet rising heating demand.
Analysts said utilities likely pulled a smaller-than-normal 71 billion cubic feet of gas from inventories during the warm week ended Jan. 11.
That compares with declines of 208 bcf during the same week last year and a five-year average decrease of 218 bcf for the period.
If correct, the withdrawal for the week ended Jan. 11 would cut stockpiles to 2.543 trillion cubic feet, 11.1 percent below the five-year average of 2.860 tcf for this time of year and the lowest for the week since 2014.
Gas output in the Lower 48 has averaged near a record high of 86.8 bcfd over the past 30 days. On a daily basis, production eased to 87.0 bcfd on Sunday from a recent high of 87.4 bcfd on Friday, according to Refinitiv data.
That is well short of the all-time daily output high of 88.8 bcfd on Nov. 30.