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U.S. natgas jumps 11% on colder weather outlook, rising demand

U.S. natural gas futures soared over 11% on Monday to a two-month high as a major winter snowstorm battered the Northeast and with forecasts suggesting much colder weather and higher heating demand over the next two weeks than previously expected.

Commodity traders are watching closely for extraordinary price moves after a series of volatile moves in numerous markets attributed to retail traders using social network Reddit. Those traders were responsible for big moves in smaller stocks in the last several days, while a big swing in silver prices had investors concerned that those traders were starting to migrate to commodities markets. Silver prices were up more than 11% earlier on Monday.

Front-month gas futures rose 28.6 cents, 11.2%, to settle at $2.850 per million British thermal units, their highest settle since Dec. 1 and their biggest daily percentage gain since September.

“The shift in the forecasts during the past couple of days has been dramatic with consensus of views now favoring some extreme cold due to move across the country later this week and continuing through next week and likely beyond,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois, noting the extra heating demand would “make a major dent in the” inventory surplus.

Gas stockpiles last week were 9.3% above the five-year average.

Energy traders said they have not heard that Reddit users were having much of an impact on the gas market, a much bigger asset than individual equities. However, the U.S. Natural Gas Fund (UNG) was also having a big day with daily volume near 9.1 million lots traded versus a daily average of around 5.1 million lots over the past year. Exchange-traded funds are viewed as more vulnerable to herd-like activity than underlying futures contracts.

“We saw a really pronounced change in the weather forecast over the weekend,” said John Kilduff, partner at Again Capital LLC in New York. “I would not rule out that the Reddit crowd is having some impact – possibly in pushing up volumes in UNG – but we’re used to seeing lots of volatility in the gas market.

” In 2020, gas futures rose or fell over 10% in intraday trade a little more than once a month on average. Data provider Refinitiv projected average gas demand, including exports, would rise from 128.4 billion cubic feet per day (bcfd) this week to 138.1 bcfd next week as the weather turns colder and heating use increases.

That was much higher than Refinitiv's outlook on Friday. Week ended     Week ended    Year ago    Five-year   
                                                 Jan 29        Jan 22        Jan 29      average    
                                               (Forecast)      (Actual)                  Jan 29     
 U.S. natgas storage (bcf):                       -184           -128         -155         -146 Global Gas Benchmark Futures ($ per mmBtu)    Current Day    Prior Day    This Month   Prior Year   Five Year
                                                                            Last Year    Average      Average
                                                                                           2020     (2016-2020)
 Henry Hub                                        2.75           2.67         1.84         2.13         2.66
 Title Transfer Facility (TTF)                    6.41           7.52         2.91         3.24         5.19
 Japan Korea Marker (JKM)                         8.87           8.85         3.29         4.22         6.49 Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days                                 
 Two-Week Total Forecast                       Current Day    Prior Day    Prior Year    10-Year    30-Year Norm
                                                                                           Norm     
 U.S. GFS HDDs                                     471           463           388         422          436
 U.S. GFS CDDs                                      2              2            5           4            3
 U.S. GFS TDDs                                     473           465           393         428          439 Refinitiv U.S. Weekly GFS Supply and Demand Forecasts                                              
                                               Prior Week    Current Week   Next Week   This Week    Five-Year
                                                                                        Last Year   Average For Month
 U.S. Supply (bcfd)
 U.S. Lower 48 Dry Production                     90.8           90.6         90.8         93.0         81.0
 U.S. Imports from Canada                          9.0           9.2           8.9         8.4          8.6
 U.S. LNG Imports                                  0.1           0.1           0.0         0.3          0.3
 Total U.S. Supply                                100.0          99.9         99.7        101.7         89.9
 
 U.S. Demand (bcfd)
 U.S. Exports to Canada                            2.5           2.7           2.8         2.7          2.6
 U.S. Exports to Mexico                            6.1           5.7           5.6         5.2          4.5
 U.S. LNG Exports                                 10.0           10.9         11.2         9.3          3.2
 U.S. Commercial                                  18.2           17.9         20.5         14.7         14.9
 U.S. Residential                                 31.1           30.3         34.8         24.0         24.7
 U.S. Power Plant                                 28.2           28.1         29.1         30.0         25.4
 U.S. Industrial                                  25.5           25.2         26.4         24.5         24.4
 U.S. Plant Fuel                                   4.5           4.5           4.5         4.5          4.5
 U.S. Pipe Distribution                            2.9           2.9           3.2         2.9          2.9
 U.S. Vehicle Fuel                                 0.1           0.1           0.1         0.1          0.1
 Total U.S. Consumption                           110.5         109.1         118.6       100.7         96.9
 Total U.S. Demand                                129.1         128.4         138.1       117.9        107.2 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)                                                 
 Hub                                           Current Day    Prior Day                             
 Henry Hub NG-W-HH-SNL                          2.68           2.76                               
 Transco Z6 New York NG-CG-NY-SNL               2.98           6.00                               
 PG&E Citygate NG-CG-PGE-SNL                    3.52           3.60                               
 Dominion South NG-PCN-APP-SNL                  2.38           2.35                               
 Chicago Citygate NG-CG-CH-SNL                  2.64           2.59                               
 Algonquin Citygate NG-CG-BS-SNL                5.50          11.50                               
 SoCal Citygate NG-SCL-CGT-SNL                  3.45           3.39                               
 Waha Hub NG-WAH-WTX-SNL                        2.50           2.45 SNL U.S. Power Next-Day Prices ($ per megawatt-hour)                                               
 Hub                                           Current Day    Prior Day                             
 New England EL-PK-NPMS-SNL                     91.50         95.25                               
 PJM West EL-PK-PJMW-SNL                        36.75         35.00                               
 Ercot North EL-PK-ERTN-SNL                     16.75         21.75                               
 Mid C EL-PK-MIDC-SNL                           33.00         35.50                               
 Palo Verde EL-PK-PLVD-SNL                      26.50         37.50                               
 SP-15 EL-PK-SP15-SNL                           26.75         38.25

Source: Reuters (Reporting by Scott DiSavino; Editing by Marguerita Choy and Chizu Nomiyama)

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