US natural gas prices catapulted into the stratosphere Monday morning after new two-week weather forecasts showed average temperatures across the country would begin to dive next week, driving up heating demand.
NatGas for December delivery soared as much as 13% to $6.40 per million British thermal units in New York.
Prices have come off the highs at the start of the US cash session, still up 10%, around $6.27.
Bloomberg cited data from private forecaster Maxar Technologies that shows cold weather in the West will traverse the country into the Midwest next week.
The two-week outlook for the US Lower 48 shows average temperatures will begin to sink Sunday and fall well below a 30-year mean through the second half of the month. By Nov. 15, average temperatures across the US could average in the mid-30s
US Lower 48 heating degree days will rise well above a 30-year trend line, indicating heating demand via households and businesses will soar as colder temps swoop across the nation.
“The gas rally underscores how sensitive traders are to potential cold blasts as below-normal stockpiles and booming exports stoke concern about whether supplies will be enough to meet demand in a deep freeze,” Bloomberg said.
Eli Rubin, an analyst at EBW AnalyticsGroup, said the prospect of colder weather means traders are buying back into NatGas markets. Prices have slumped by more than 35% since August, with hedge funds trimming bullish bets to the lowest in two years — all because of warmer weather. NatGas appears to have found a near-term bottom as ‘Old Man Winter’ is set to make an entrance.
As a reminder, soaring energy prices mean US households are about to pay 47% more for electricity than a year ago — making it very costly to heat homes.