REPOST: Natural gas futures rally to highest level in nearly 6 weeks

This Nasdaq article reports how climate affects the demand for natural gas in the market .


NEW YORK--Natural gas futures settled at their highest level in almost six weeks Monday, lifted by forecasts for below-normal temperatures that suggest steady demand for gas-fired heating in the coming weeks.

Natural gas for April delivery settled 7.3 cents, or 2.1%, higher at $3.529 a million British thermal units on the New York Mercantile Exchange. That is the highest settlement for a front-month contract since Jan. 23.

A winter storm is expected to dump heavy snow from the Midwest to the Mid-Atlantic in the next few days, according to weather forecasts, while below-average temperatures are expected to persist for at least the next few weeks.

"The latter half of month, with below-normal conditions for the lion's share of the U.S.--that's just lending some late-season heating demand," said Matt Smith, commodity analyst at Schneider Electric.

Roughly half of all U.S. homes are heated using natural gas, so below-normal temperatures typically boost demand for the fuel in the winter.

According to Commodity Weather Group, below-normal temperatures are set to persist across much of the East Coast and Midwest over the coming weeks, the private forecaster said in its outlook for the next 11 to 15 days.

The coming storm is the latest event in a winter that has proven a boon for bulls in the natural gas market. Sustained cold temperatures have led to higher demand and have helped whittle away last year's massive inventory overhang.

Last week, the Energy Information Administration said natural gas inventories fell by a greater than expected 171 billion cubic feet, placing stockpiles at 2.229 trillion cubic feet. That is 12% below last year's level, when a combination of weak demand and surging shale gas production led to a glut of natural gas.

Market watchers caution that the recent rally likely has an expiration date, given the onset of spring.

"We're just running out of winter. Spring is three weeks away," said Dominick Chirichella, analyst at the Energy Management Institute in New York. "I think it's going to take a fundamental change to really convince the buyers to stay in the market at these levels."

Author of various books on petroleum production, Ali Ghalambor continues to deliver numerous technical presentations and courses throughout the world. This Facebook page contains more updates about the industry.