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Gas for February delivery rose 16% in New York and settled at $3.936 per million British thermal units on Monday, the biggest daily jump since the contract started trading in 2012. At one point during the trading session, the most-active contract climbed to a two-year high, on an intraday basis.
The National Weather Service expects a higher chance of colder-than-normal weather across the US East and Midwest in its latest 8-14 day outlook. That would be an abrupt shift from what’s until now been a mostly mild autumn and early winter in the US.
Forecasts for early next month turned markedly colder across a swath of the country from Texas to Michigan to Georgia. That shift is driving bullish sentiment for energy demand that already was expected to see a winter-driven spike, according to NatGasWeather.com.
The frigid outlook is “creating a buying frenzy,” Dennis Kissler, an energy trader and analyst at BOK Financial, wrote in a note Monday.
Front-month gas futures largely stayed below $3 for much of the year amid ample domestic production from shale fields. However, the imminent cold snap threatens to freeze some wellheads, which could stifle some gas output, especially in parts of the Marcellus Shale of Appalachia, according to analytical-trading firm Analytix.AI.
Funds relying on algorithmic trading strategies have also changed risk positions from flat to net long, according to Stephen Roseme, managing member of Bridgeton Research Group LLC.
Additional consumption for supplying liquefied natural gas exports from the Gulf Coast is expected to add to overall demand in the coming period, including an expansion at Cheniere Energy Inc.’s Corpus Christi LNG plant and Venture Global LNG Inc.’s second plant Plaquemines LNG.
Gas futures for February delivery closed up 55.3 cents, or 16%, to $3.936 per million British thermal units in New York.
