Forecasts for colder weather ahead for the east coast has natural gas running higher today. The East Coast comprises the largest natural gas market for home heat, but nearly half of all U.S. homes rely on natural gas for heat.
An already cold winter has thinned inventories 10% below the five year average and nearly 16% behind year-ago. Current natgas pricing lies 28% above the prior year as traders eye high demand ahead. Today, February '14 natural gas futures opened at $4.30 3/4 and has ranged around that figure most of the morning.
But if the weather forecasts are correct, temperatures which had offered some welcome relief, simply by edging above zero will turn lower in a few days. Consensus suggests last week's drawdown on storage may be a record setting 300 billion cubic feet, eclipsing the previous record of 285.
If the cold continues, high pricing will rule the day and may encourage producers to ramp up production. That would help mitigate some of the supply concern, but prices will remain high until inventories at least catch up with the bottom end of the five-year average.