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Natural Gas Surges 4% on Big Drop in US Supplies, Brutal Cold

January 17, 2019 at 16:12 by Andrew Moran

Natural gas futures surged as much as 4% on Thursday after the US government reported a steep decline in domestic inventories of the energy supply. Natural gas prices have been posting impressive gains in the past week on frigid temperatures engulfing many parts of the US, spurring speculation that Old Man Winter is permanently entrenched for the next couple of months.

February natural gas futures rose $0.10, or 2.95%, to $3.49 per million British thermal units (btu) at 14:51 GMT on Thursday on the New York Mercantile Exchange. Natural gas is poised for a huge weekly gain of about 19%.

According to the US Energy Information Administration (EIA), domestic stockpiles of natural gas declined by 81 billion cubic feet for the week ending January 11, which is mostly in line with the market forecast of 77 billion cubic feet. In total, US supplies stand at 2.533 trillion cubic feet, down 77 billion cubic feet from the same time a year ago, and 327 billion below the five-year average.

With weather forecasts suggesting that the brutally cold temperatures will cripple much of the US, traders are confident that the winter weather will drive up heating demand and diminish stockpiles. Prior to the weekend, temperatures have been about average, leading investors to limit their net-long positions. However, heading into the weekend, traders are reversing their positions and confident that natural gas could soon top $4 per btu should the freezing temperatures last long enough.

Ultimately, since the beginning of December, investors believed the cold weather was never coming. But, considering the recent spike in natural gas prices, it is evident that there is still plenty of winter weather left – warm or cold.

In other energy markets, March West Texas Intermediate (WTI) crude oil futures tumbled $1.18, or 2.23%, to $51.45 a barrel. March Brent crude futures shed $0.89, or 1.45%, to $60.43 per barrel. March gasoline futures slipped $0.025, or 1.77%, to $1.40 per gallon. March heating oil futures slumped $0.035, or 1.9%, to $1.85 a gallon.

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