Natural gas futures climbed in New York for the fifth time in six days as a winter storm brings heavy snow and icing to states in the U.S. South, stoking demand for the heating fuel.
Gas gained as much as 5.5 percent after tumbling the most in nine months yesterday. MDA Weather Services in Gaithersburg, Maryland, predicted colder-than-normal weather across most of the U.S. through Feb. 11 as an arctic front sweeps the country. The low in New Orleans today may be 26 degrees Fahrenheit (minus 3 Celsius), 21 less than average, according toAccuWeather Inc. in State College, Pennsylvania.
“Some people are having seller’s remorse after looking at the temperatures overnight,” said Phil Flynn, a senior market analyst at Price Futures Group in Chicago. “It’s still pretty darn cold out there.”
Natural gas for February delivery rose 13.1 cents, or 2.7 percent, to $4.978 per million British thermal units at 12:12 p.m. on the New York Mercantile Exchange. Trading volume was 14 percent above the 100-day average. The futures have climbed 18 percent this month.
The premium of February to March futures narrowed 4.5 cents cent to 12.8 cents. The spread reached to 18.4 cents on Jan. 24, the widest for the months since June 2010. March gas traded 48.8 cents above the April contract, compared with 38.8 cents yesterday.
February $5 calls were the most active options in electronic trading. They were 0.7 cent lower at 4.1 cents per million Btu on volume of 825 at 12:29 p.m. Calls accounted for 67 percent of trading volume.
February gas options expire today. Implied volatility for March at-the-money options was 73.13 percent at noon, compared with 32.9 percent a month ago.
The storm will extend from the central Gulf Coast to the southern mid-Atlantic coast today, theNational Weather Service said in a bulletin at 3:16 a.m. in Washington. A wintry mix is possible as far south as southern Louisiana.
Commodity Weather Group LLC in Bethesda, Maryland, said January is on track to be the coldest month of the 21st century in the contiguous U.S. in terms of gas-weighted heating degree days, a measure of energy demand. About 49 percent of U.S. households use gas for heating, according to the Energy Information Administration, the Energy Department’s statistical arm.
EIA data scheduled for release Jan. 30 may show that natural gas inventories tumbled 224 billion cubic feet in the seven days ended Jan. 24, according to Donald Murry, an economist at C.H. Guernsey & Co. in Oklahoma City. The five-year average decrease for the week is 162 billion, EIA data show. Supplies dropped by 191 billion a year earlier.
Stockpiles totaled 2.423 trillion cubic feet as of Jan. 17, 13.2 percent below the five-year average and 19.8 percent less than year-earlier supplies.
The number of rigs drilling for gas in the U.S. slid by nine to 356, Baker Hughes Inc. in Houston said Jan. 24. The total is down 18 percent from a year ago.
The gas rally above $5 per thousand cubic feet ($4.89 per million Btu) “is transitory and not sustainable,” Hsulin Peng, an analyst at Robert W. Baird & Co. in New York, said in a note to clients today. “The U.S. market remains awash in natural gas.” Prices may drop to $4 per thousand cubic feet, Peng said.