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U.S. set for more Arctic cold as natural gas prices surge

BY MIKE ANDERSON

COLLEGE PARK, Maryland (Bloomberg) -- The U.S. will get another blast of freezing Arctic air this week, bringing snow and sleet as far south as Texas and helping push natural gas to a four-year high.

“A very strong cold front will be bringing frigid conditions back to the central and eastern U.S.,” the Weather Service said in a bulletin on its website today at 3:01 a.m. eastern time. Subfreezing highs are expected “well into the Deep South,” with snow, sleet, and freezing rain expected by tomorrow near the Central Gulf Coast and becoming heavier over the Carolinas.

“This rare winter storm will make many people who love snow very happy,” according to the report.

January is on track to be the coldest month of the century in the lower 48 states, according to Commodity Weather Group LLC, after waves of freezing air swept across the country. Natural gas rose for a fifth day in New York and was poised for the highest close in almost four years, while heating oil traded at the highest prices in almost five months. Wheat rose on speculation that the freezing weather will harm crops.

Four of the 10 coldest days of the 21st century in the contiguous U.S. states occurred this month, Matt Rogers, president of Commodity Weather Group in Bethesda, Maryland, said last week. Chicago was colder than the South Pole at the start of the month. “Upper-level energy” will help produce sleet and snow over parts of southeastern Texas and western Oklahoma by tomorrow morning, according to the College Park, Maryland-based weather service.

Natural gas for February delivery advanced as much as 5 percent to $5.442 per million British thermal units on the New York Mercantile Exchange, and was at $5.335 at 10:12 a.m. in London. The volume of all futures traded was about six times the 100-day average. The contract jumped 20 percent last week, the most since October 2010.

Gas inventories dropped by 1.386 trillion cubic feet to 2.423 trillion from Oct. 31 through Jan. 17. The drop was 50 percent more than the five-year average decline of 927 billion for the period, Jose Villar, an analyst with the U.S. Energy Information Administration, said in an email Jan. 23. It’s the fastest pace of withdrawals on record for the period, he said.

Goldman Sachs Group Inc. cut its end-of-March inventory projection to 1.388 trillion cubic feet from an earlier estimate of 1.605 trillion, Samantha Dart, a London-based analyst with the bank, said in a Jan. 20 note to clients. Lower stockpiles combined with average weather in February and March mean gas prices may be closer to $4.40 to $4.50 this year, higher than the bank’s current forecast of $4.25, she said.

Ultra-low-sulfur diesel futures, a proxy for heating oil, gained as much as 1.5 percent to $3.1835 a gallon in New York, the highest since Aug. 30. Prices have risen eight times in the past nine days. West Texas Intermediate oil for March delivery was at $96.93 a barrel, up 30 cents, on Nymex.

Wheat futures in Chicago rose for a second time in three days on speculation that the U.S., the world’s biggest shipper, may reduce output because of the cold.

The contract for March delivery on the Chicago Board of Trade gained as much as 0.7 percent to $5.69 a bushel and was at $5.67 by 10:13 a.m. in London. Futures are up 1.1 percent since dropping to $5.605 a bushel Jan. 10, the lowest level since July 2010. Prices advanced 0.3 percent last week, snapping a seven- week slump, the longest since October 2008.

01/27/2014

 

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