Gas Caps First Monthly Gain Since June on New York Cold Outlook

  • Once forecasts for cold arrived, futures prices rebounded
  • Year's loss cut in half; weekly gain most since February 2014

New Yorkers who basked in Florida-like weather this month are going to have to dig out winter gear next week. That prospect stoked a record year-end rally in U.S. natural gas to cap the first monthly gain since June.

Gas futures surged 28 percent since mid-December, the biggest rebound for the period in New York Mercantile Exchange data going back to 1990. They extended gains after a government report showed the biggest supply drop in three weeks.

Prices fell to a 16-year low earlier this month because of unusually warm weather in the Midwest and Northeast, the biggest consumers of the heating fuel, and record stockpiles. Forecasts have since turned colder, with Manhattan’s low temperature on Jan. 4 sliding to 21 degrees Fahrenheit (minus 6 Celsius), 6 below normal, said AccuWeather Inc.

“These are wild days,” said John Kilduff, partner at Again Capital LLC in New York. “We got prices so low like it was going to be Florida in the Northeast for the entire winter, and obviously that’s not going to be the case. Once that hit, prices rebounded.”

Futures Price

Gas for February delivery climbed 12.3 cents, or 5.6 percent, to $2.337 per million British thermal units on the Nymex. Prices advanced 15 percent this week, the most since February 2014. The futures, which gained 4.6 percent in December, narrowed the year’s loss by half to 19 percent. The market will be closed Friday in observance of New Year’s Day.

Overnight weather models now show two to three colder-leaning weeks “due to a slight hiatus in warm El Nino,” Matt Rogers, president of Commodity Weather Group LLC in Bethesda, Maryland, said in an e-mail. There will be a stronger cold push on the East Coast early next week than previously anticipated.

This blast of cold in the East may boost gas withdrawals from storage caverns into the triple digits as early as next week, especially because draws have been a bit stronger than mild weather would have suggested this month, Kilduff said.

Inventories contracted by 58 billion cubic feet last week to 3.756 trillion, said the U.S. Energy Information Administration. Analyst forecasts showed a decline of 54 billion.  The five-year average drop for the period is 95 billion, while last year’s was 29 billion.

The supply report was “largely in line with expectations; it didn’t really move the market much,” said Mariana Eizayaga, an associate analyst with Tradition Energy in Stamford, Connecticut. “We are still waiting for the cold. It doesn’t seem like it’s going to be so bitter in January, but we are hoping it will be so the prices go up.”

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