Natural gas futures and exchange traded funds surged Monday as a winter storm hit the Northeast, with forecasts for a frigid February fueling natgas demand for heating.
On Monday, the United States Natural Gas Fund (NYSEArca: UNG) increased 9.9%, while the Nymex natural gas futures advanced 10.4% to $2.83 per million British thermal units.
“An unusually strong response to weekend adjustments to the short-term temperature forecasts,” according to Ritterbusch and Associates, projecting prices could approach $3 this month if the weather outlook materializes.
The projected period of freezing conditions over the next two weeks could fuel above-normal gas-weighted degree days nationally, according to Bespoke Weather, NaturalGasIntelligence reports.
“We still side with colder risks, overall, in this setup,” Bespoke said. “Given how cold has failed to materialize all winter, we feel expectations are skewed away from cold here, at least somewhat.”
According to NatGasWeather, snow will pile up in the Northeast, but temperatures will remain mild for much of the country. However, conditions could change next week when an Arctic blast blows across the Rockies, the Great Plains and past the Great Lakes. Consequently, temperatures could drop low enough in North Texas and other gas-producing regions to freeze well heads and disrupt supply.
“The largest unknown right now seems to be just how far east the cold will extend and if major populations in Chicago and the East Coast will feel the frost,” Tudor, Pickering, Holt & Co. analysts said in a note.
Natural gas futures are trading roughly 50% higher for the same period year-over-year when the weather conditions were uncommonly warm, but they were still about 15% below the price to start this heating season. Temperatures remained above average for the covered week, including in the Midwest, a key driver of gas demand during the winter season.
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