Polar blast outlook drives US natural gas to 10th day of gains

Power supply

Natural gas futures climbed for a 10th day in New York, the longest streak of gains in 14 years, as forecasts showed arctic air sweeping the U.S., boosting demand for heating fuels.

Frigid weather will move into the Great Plains and Midwest over the next 10 days as below-normal temperatures blanket states east of the Rocky Mountains, said Commodity Weather Group LLC. The low in Minneapolis on Nov. 14 will be 2 degrees Fahrenheit (minus 17 Celsius), 25 below normal, AccuWeather Inc. said on its website.

“This next polar vortex is hitting hard and is expected to persist for several days,” said Scott Hanold, energy analyst at RBC Capital Markets in Minneapolis. “It’s a cold start to winter and people are engaged again.”

Natural gas for December delivery gained 2 cents, or 0.5 percent, to $4.4323 per million British thermal units at 9:52 a.m. on the New York Mercantile Exchange after rising to $4.544, the highest intraday price since June 26. Volume for all futures traded was 78 percent above the 100-day average. Futures are up 25 percent from a year ago.

Gas prices have surged 24 percent from an 11-month low on Oct. 27 as weather models showed progressively colder forecasts for this month following an unusually mild summer and fall.

“The early-season arctic plunge” will spread across a bigger swath of the central and eastern U.S. and the cold pattern will dominate most of the lower 48 states through Nov. 24, Matt Rogers, president of Commodity Weather in Bethesda, Maryland, said in a note to clients today. Forecasts indicate this will be the coldest November since 2000, based on heating degree days, a proxy for weather-driven energy demand, he said.

New York City’s low on Nov. 19 will drop to 29 degrees, 12 below average, while the reading in Dallas will be 36, 10 lower than usual, according to AccuWeather in State College, Pennsylvania.

About 49 percent of U.S. households use gas for heating.

“The developing cold in key gas-consuming regions looks to be a result of Typhoon Nuri moving into Alaska rather than a sustained change in weather patterns,” Adam Longson, an analyst with Morgan Stanley in New York, said in a note to clients today. The worst of this cold is “likely already priced in” and robust supplies will allow for another storage injection next week, eliminating a storage deficit in the East, he said.

Waves of polar air spurred record gas demand during the previous winter, sending inventories of the heating and power- plant fuel to an 11-year low. Stockpiles have since rebounded at the fastest pace in Energy Information Administration data going back to 1994 as production rose to an all-time high for the fourth consecutive year.

Storage levels totaled 3.571 trillion cubic feet on Oct. 31, 6.8 percent below the five-year average, narrowing from a record 55 percent in March, according to the EIA. Supplies will start the peak demand season at a deficit for the first time in government data going back to 2005.

RBC’s Hanold said the EIA’s weekly gas inventory report will probably show its first withdrawal in next week’s report.

“Now, with an early snap of cold, the market is pretty focused on what happened last year,” he said. “Being in Minneapolis, I’m cheering for the gas market, but I don’t want to be cold.”