Natural gas futures are skyrocketing to start the trading week, lifted by a blast of wintry weather that blanketed the US Northeast and revised weather forecasts calling for a frigid February. Is this the start of a short-term rally for the so-called bridge fuel as Old Man Winter dishes out one last blast of freezing temperatures and snow across the US, Canada, and Europe?
March natural gas futures soared $0.237, or 9.24%, to $2.801 per million British thermal units (btu) at 14:28 GMT on Monday on the New York Mercantile Exchange. After an impressive start to 2021, natural gas prices had eased amid expectations that low temperatures would be the norm to close out the 2020-2021 winter season. Year-to-date, natural gas is up nearly 11%.
Over the weekend, New York was pummeled with heavy snow, wind gusts of up to 50 m.p.h, and temperatures around below the freezing market. According to the National Weather Service, up to 20 inches of snow could fall on New York by the time the storm is over. Mayor Bill de Blasio has issued a local emergency declaration, prohibiting most travel in the city, except in cases of emergency.
The snowstorm is already traveling to neighboring states, including New Jersey, where the transit system has suspended service. But could this storm be the start of a larger wintry pattern in other parts of the US?
Over the weekend, several weather agencies revised their forecasting models for February, predicting that unseasonably cold weather would blanket the US as far as North Texas, with much of the pain being felt in the East and Midwest. Industry analysts are warning that this could significantly drive up heating demand and affect production capabilities.
Bespoke Weather Services wrote in its report:
“When considering that the selloff Friday seemed overdone even before these changes, the recipe was there for a large move, and it may not be finished yet, as there is potential for additional cold around the middle of the month, though location is unclear.”
Following last week’s smaller-than-expected supply drawdown, are markets pricing in a much larger decline in US inventories for the next couple of weeks? Domestic stockpiles fell by 128 billion cubic feet for the week ending January 22, lower than the median estimate of 136 billion cubic feet.
In other energy commodities, March West Texas Intermediate (WTI) crude oil futures dropped $0.62, or 1.19%, to $52.82 per barrel. April Brent crude futures advanced $0.70, or 1.27%, to $55.73 a barrel. March gasoline futures edged up by $0.0125, or 0.81%, to $1.5652 per gallon. March heating oil futures tacked on $0.0228, or 1.43%, to $1.6212 a gallon.