Natural gas exchange traded funds surged Thursday as freezing winter conditions help support greater heating demand.
On Thursday, the United States Natural Gas Fund (NYSEArca: UNG) rose 7.1% and United States 12 Month Natural Gas Fund (NYSEArca: UNL) added 2.9% as Nymex natural gas futures advanced 7.3% to $2.93 per million British thermal units.
Cold weather across the northern tier of the U.S. spread to the East Cost this week and is expected to remain frigid into early January, supporting the rise in heating demand, reports Patti Domm for CNBC.
“This is a substantial strengthening in the heating demand outlook. The cold weather system that was supposed to be limited to the northern Midwest has spread to the eastern part of the country,” John Kilduff, partner at Again Capital, told CNBC.
Natural gas prices finally snapped losses, which were dragged down by an abundance of supply, especially with heating demand depressed in an unusually warm early winter months.
Gas prices also gained momentum Thursday after the Energy Information Administration reported storage withdrawals of 112 billion cubic feet last week, a second week of triple-digit drawdowns.
“Initially it had appeared that the drawdown could be even larger, but a bit warmer weather and elevated production brought the number right in line with our revised estimate,” Bespoke Weather Services said of the 112 Bcf figure, according to Natural Gas Intelligence. “We see this print as a bit looser week-over-week but still relatively tight given the widespread warmth last week…We see room to test resistance at $2.98-3.02 into week end, but worry we struggle to move higher with mid-January warm risks and continually growing production.”
“Now, we are seeing risks that some of the strongest cold could come again between Jan. 4 and 6 before gradually moving out,” Jacob Meisel, chief weather analyst at Bespoke Weather, told CNBC. “We’re rallying because the warmup has been pushed back. … This move is almost entirely weather driven.”
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