Arctic Chill Blasts U.S., Puts $4 Natural Gas in Reach

December 8, 2016 03:14 PM
 
Chill

A blast of arctic air across the U.S. may deliver natural gas bulls something they’ve spent more than two years waiting for: prices above $4.

Cold weather has already sent gas futures surging 19 percent since the start of November. And if the forecasts for a deep chill across the northern half of the U.S. hold true, prices may reach $4 per million British thermal units for the first time since December 2014, when plunging temperatures had demand for the heating fuel soaring.

“That $4 level is now within reach,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “The market seems determined to rally, and we can continue to push higher as long as these cold forecasts don’t fall apart.”

December’s icy grip has already sent gas futures soaring in the past week by the most seasonally in a decade, stoking bets that the cold will deep enough to burn through the nation’s glut of gas and propel prices even higher next year. Production of the power-plant fuel in the nation’s prolific shale formations is projected to fall this year, and supplies are already lower as U.S. shale gas head to Mexico and overseas.

For a look at how cold weather has traders betting on a notorious spread, click here.

Gas futures have jumped more than 7 percent in the first week of December, settling at $3.603 in New York Wednesday. Prices are up 54 percent this year.

This could be the coldest December since 2013 across the northern U.S., according to Matt Rogers, president of the Commodity Weather Group LLC in Bethesda, Maryland. An outbreak of polar air will send temperatures plunging from Calgary to Chicago, he said.

Chicago’s low may tumble to 9 degrees Fahrenheit (minus 13 Celsius) on Dec. 15, 14 below average, data from AccuWeather Inc. show.

To contact the reporters on this story: Christine Buurma in New York at cbuurma1@bloomberg.net, Brian K. Sullivan in Boston at bsullivan10@bloomberg.net. To contact the editors responsible for this story: Lynn Doan at ldoan6@bloomberg.net, Jim Efstathiou Jr.

©2016 Bloomberg L.P.

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