--Natural gas prices soar in Northeast as cold snap, winter storm move in
--Futures post highest settlement in nearly a month
--"While supply is greatly increased...right now we have a transportation and storage issue," consultant says
(Adds information on propane in the last three paragraphs.)
By Brett Philbin
NEW YORK--The price of natural gas delivered to New York City and the mid-Atlantic states soared to a record high
Tuesday as a snowstorm brought freezing temperatures to the U.S. Northeast and as traders worried about a potential drop
in supplies of the heating fuel.
Natural gas for delivery Wednesday soared to $135 per million British thermal units at Transco Zone 6, a pipeline
delivery point in New Jersey where New York City gas prices are set, according to IntercontinentalExchange Group Inc. On
Friday, prices traded between $10 and $25 per million Btus.
Prices on the same pipeline for delivery from the Virginia/Maryland border to Linden, N.J., rose even higher, climbing
to a record $140/mmBtu.
The surge in prices for the second time this month underscores concerns about the infrastructure needed to transport
natural gas from booming shale fields to densely populated areas when the heating fuel is needed.
Those worries also boosted natural gas futures, which posted their highest settlement since Dec. 26.
Natural gas for February delivery, reflecting prices nationwide, gained 10.5 cents, or 2.4%, to $4.431 per million
British thermal units on the New York Mercantile Exchange.
Traders expect greater demand for natural gas to heat homes and office buildings, as an Arctic blast brings snow to
the East Coast. The National Weather Service projects "moderate to heavy snow from the central Appalachians to New
England" over the next two days.
Natural gas prices typically spike to between $40/mmBtu and $50/mmBtu in periods of cold weather, analysts said. But
Tuesday's sharp climb beat a previous record of $90/mmBtu for the New York hub set on Jan. 6, when another Arctic blast
stoked gas demand.
While the current projected chill won't match the low temperatures set in early January, the frigid air over the next
six to 10 days is expected to last longer, said Phillip Vida, lead meteorologist at MDA Weather Services, a
Gaithersburg, Md., forecaster.
Mr. Vida said the number of heating-degree days, a measure of gas demand that rises when temperatures are colder, from
Tuesday to Jan. 30 is expected to total 349.87, more than the 346.26 in the first nine days of the month, while the
temperature in New York City on Jan. 28 could fall to 7 degrees Fahrenheit, the lowest for that day in roughly 70 years.
Nearly half of U.S. households rely on natural gas as their primary heating source, with 4.3 million such consumers
residing in New York state, according to the Energy Information Administration.
"While supply is greatly increased because we have plenty of natural-gas production, right now we have a
transportation and storage issue," said Dennis Weinmann, a principal at Coquest Inc., a Dallas energy brokerage and
consulting firm. "We don't have gas where we need it right this second."
Drilling innovations have allowed energy companies to extract natural gas from shale-rock formations, putting
production of the fuel at record highs. But the pipeline network to move the gas has expanded at a slower pace, leaving
a national glut of the fuel in storage.
Those supplies are starting to dwindle, as winter demand for gas picks up. In the week ended Jan. 10, a period
covering the last Arctic blast, utilities pulled 287 billion cubic feet of gas from storage, according to the EIA. The
sharp decline beat the previous record withdrawal of 285 bcf set in December.
The amount of natural gas in storage is now 2.53 trillion cubic feet, down 15% from the five-year average for this
time of year.
Teri Viswanath, an analyst at BNP Paribas SA, said she expects gas stockpiles to fall further after the current cold
"Consumers tend to respond to weather that is persistent and unending, and that's likely to be what we will see for
the balance of January," Ms. Viswanath said.
Meanwhile, colder-than-normal temperatures have also helped to lift wholesale prices for propane, which rose to $1.708
a gallon as of Jan. 13, up sharply from $1.686 a gallon a week earlier, according to the EIA. The run-up comes after
farmers last fall used a large amount of the fuel to dry crops that had been soaked by heavy rains, and that drained gas
stockpiles in the Midwest to unusually low levels.
In addition, the recent cold snap is making it more difficult for truck drivers to deliver enough shipments of propane
to customers, leading some states, including Ohio, to waive restrictions on how long these employees can work. The fuel,
which is made from processing crude oil and natural gas, is used for everything from cooking food to drying clothes.
The frigid weather "kind of aggravated the situation," said Michael McCafferty, an editor at Platts, a New York
company that provides benchmark prices for physical commodities and futures and is owned by The McGraw-Hill Cos. (MHP).
FUTURES SETTLEMENT NET CHANGE
Nymex February $4.431 +10.5c
Nymex March $4.358 +9.9c
Nymex April $4.179 +9.8c
CASH HUB RANGE PREVIOUS DAY
El Paso Perm $4.39-$4.4925 $4.285-$4.345
El Paso SJ $4.42-$4.60 $4.31-$4.355
Henry Hub $4.50-$4.65 $4.38-$4.42
Katy $4.45-$4.49 $4.31-$4.34
SoCal $4.59-$4.71 $4.50-$4.55
Tex East M3 $45.00-$95.00 $9.00-$12.50
Transco 65 $4.62-$4.76 $4.415-$4.48
Transco Z6 $85.00-$135.00 $10.00-$25.00
Waha $4.48-$4.50 $4.30-$4.34
Write to Brett Philbin at firstname.lastname@example.org
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