Natural gas stages record rally on cold weather outlook

Christmas finally arrived for natural gas investors.

Gas futures surged nearly 10 percent on Monday, and prices have risen more than 20 percent since mid-December, on speculation that colder weather in January will stoke demand and help ease a supply glut.

Berkshire Hathaway’s Northern Natural Gas pipeline said Monday that storms are affecting transportation of the fuel in the Rockies, Oklahoma, West Texas and New Mexico. Temperatures across most of the Midwest and East Coast will drop to seasonal levels Jan. 2 through Jan. 6, said Commodity Weather Group LLC.

“The market is reacting a little bit to the prospect of lower temperatures in the next couple of weeks,” said Santiago Diaz, energy trading associate at FCStone Latin America in Miami.

Gas futures for January delivery jumped 19.9 cents to $2.228 per million British thermal units on the Nymex, the highest close since Dec. 1. Prices had dropped to $1.755 on Dec. 17, the lowest settlement since March 1999. January options expire Monday and the futures contracts for the month expire Tuesday.

“It took two months, but winter is finally here and natural gas futures are moving along with them,” Aaron Calder, senior market analyst at Gelber & Associates in Houston, said in a note to clients Monday. “The demand situation still has a long way to go before the supply glut is dealt with, but this is an encouraging start.”

Gas inventories probably fell by 42 billion cubic feet last week, based on the median of four analyst estimates compiled by Bloomberg. The five-year average withdrawal for the period is 95 billion. The U.S. Energy Information Administration is scheduled to release its next gas inventory report on Thursday.

This story was originally published December 28, 2015 at 3:52 PM with the headline "Natural gas stages record rally on cold weather outlook."