January 14, 2019 / 2:57 PM / 5 months ago

UPDATE 3-U.S. natgas soars 15 pct as volatility returns with frigid forecasts

 (Adds latest prices)
    Jan 14 (Reuters) - U.S. natural gas futures surged over 15 percent on Monday on forecasts
for much colder weather through the end of January than previously expected, sparking a return
of extreme volatility seen at the end of last year.
    In their latest predictions, meteorologists said the weather would turn intensely cold
starting around Jan. 19 and remain frigid across much of the country through at least the end of
the month. 
    "This (weather) pattern could easily extend into February and bring several weeks of
sustained cold and elevated heating demand, resulting in the largest storage withdrawals so far
this season," Daniel Myers, market analyst at Gelber & Associates in Houston, said in a report,
noting "The market will again feel pressure from low storage inventories in the coming weeks."
    Those cold forecasts and concerns about the low amount of gas in inventory revived the
extreme volatility seen at the end of 2018 after the market slumbered for the first couple of
warmer-than-normal weeks of the new year and utilities took a break from big storage
withdrawals.
    Front-month gas futures for February delivery on the New York Mercantile Exchange
were up 48.3 cents, or 15.6 percent, at $3.582 per million British thermal units at 1:48 p.m.
EST (1848 GMT), their highest since Dec. 27.
    That puts the contract on track for its biggest daily percentage gain in eight weeks and
second biggest since 2010. It also marks the second session that the front-month moved over 5
percent since the start of the year, after Friday.
    In the last two months of 2018, meanwhile, the contract rose or fell by more than 5 percent
27 times.
    With more cold coming, Refinitiv projected demand for gas in the Lower 48 states would rise
to 125.9 billion cubic feet per day (bcfd) next week, up from a forecast 124.5 bcfd on Friday.
That compares with an expected 116.5 bcfd this week.
    Traders said intense volatility late last year was due to a combination of changing weather
forecasts and concerns about low stockpiles. But weeks of warmer-than-usual weather in December
and early January allowed utilities to cut the vast storage deficit from 21 percent a few weeks
ago to just 15 percent now by leaving more fuel in underground storage facilities.
    If the cold weather materializes next week, traders said utilities will have to start
pulling massive amounts of gas out of storage again to meet rising heating demand.
    Analysts said utilities likely pulled a smaller-than-normal 71 billion cubic feet of gas
from inventories during the warm week ended Jan. 11.
    That compares with declines of 208 bcf during the same week last year and a five-year
average decrease of 218 bcf for the period.
    If correct, the withdrawal for the week ended Jan. 11 would cut stockpiles to 2.543 trillion
cubic feet, 11.1 percent below the five-year average of 2.860 tcf for this time of year and the
lowest for the week since 2014.
    Gas output in the Lower 48 has averaged near a record high of 86.8 bcfd over the past 30
days. On a daily basis, production eased to 87.0 bcfd on Sunday from a recent high of 87.4 bcfd
on Friday, according to Refinitiv data.
    That is well short of the all-time daily output high of 88.8 bcfd on Nov. 30.
    
                                         Week ended  Week ended  Year ago  Five-year  
                                          Jan. 11       Jan. 4   Jan. 11    average   
                                          (Actual)    (Actual)              Jan. 11   
 U.S. natgas storage (bcf):                 -71         -87        -208      -218     
                                                                                      
                                                                                      
 Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days                   
 Two-Week Total Forecast                  Current    Prior Day    Prior     10-Year   30-Year  
                                            Day                    Year      Norm        Norm
 U.S. GFS HDDs                              433         493        428        448        458
 U.S. GFS CDDs                               1           1          2          3          2
 U.S. GFS TDDs                              534         494        430        450        460
                                                                                      
 Refinitiv U.S. Weekly GFS Supply and Demand Forecasts                                
                                         Prior Week   Current      Next    This week  Five-Year
                                                        Week       Week    last year   Average
                                                                                      For Month
 U.S. Supply (bcfd)                                                                        
 U.S. Lower 48 Dry Production               86.6        86.8       86.6      76.2        71.5
 U.S. Imports from Canada                   8.9         8.9        8.9        9.9        9.1
 U.S. LNG Imports                           0.1         0.2        0.1        0.5        0.4
 Total U.S. Supply                          95.6        96.0       95.6      86.6        81.0
                                                                                           
 U.S. Demand (bcfd)                                                                        
 U.S. Exports to Canada                     2.8         2.8        2.8        2.8        2.3
 U.S. Exports to Mexico                     4.9         4.7        4.8        4.3        3.1
 U.S. LNG Exports                           4.9         4.9        5.2        2.4        0.8
 U.S. Commercial                            14.5        17.1       19.7      19.1        17.0
 U.S. Residential                           24.2        29.4       34.4      33.8        30.1
 U.S. Power Plant                           22.8        25.2       25.6      27.4        23.7
 U.S. Industrial                            24.3        25.3       26.3      25.1        23.2
 U.S. Plant Fuel                            4.3         4.3        4.3        4.3        4.3
 U.S. Pipe Distribution                     2.3         2.3        2.8        2.3        2.3
 U.S. Vehicle Fuel                          0.1         0.1        0.1        0.1        0.1
 Total U.S. Consumption                     92.4       104.0      113.2      112.1      100.7
 Total U.S. Demand                         105.0       116.5      125.9      121.6      106.9
                                                                                      
                                                                                      
 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)                                   
 Hub                                      Current    Prior Day                        
                                            Day                                       
 Henry Hub NG-W-HH-SNL                    2.89        2.95                          
 Transco Z6 New York NG-CG-NY-SNL         3.88        5.26                          
 Dominion South NG-PCN-APP-SNL            2.58        2.66                          
 Chicago Citygate NG-CG-CH-SNL            2.72        2.71                          
 Algonquin Citygate NG-CG-BS-SNL          5.25        6.81                          
 SoCal Citygate NG-SCL-CGT-SNL            4.30        4.95                          
 Waha Hub NG-WAH-WTX-SNL                  1.82        2.00                          
                                                                                      
 SNL U.S. Power Next-Day Prices ($ per megawatt-hour)                                 
 Hub                                      Current    Prior Day                        
                                            Day                                       
 New England EL-PK-NPMS-SNL              45.75       53.50                          
 PJM West EL-PK-PJMW-SNL                 37.75       39.00                          
 Ercot North EL-PK-ERTN-SNL              23.00       22.75                          
 Mid C EL-PK-MIDC-SNL                    29.50       26.40                          
 Palo Verde EL-PK-PLVD-SNL               30.63       36.50                          
 SP-15 EL-PK-SP15-SNL                    37.50       39.00                          
 
 (Reporting by Scott DiSavino
Editing by Chizu Nomiyama and Marguerita Choy)
  
 
 
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