Natural-gas prices have climbed from less than $3.50/mmBtu in
early November, as continued cold weather has led to robust heating
demand. About half of all U.S. households use natural gas as their
primary heating source, according to the U.S. Energy Information
Administration.
Natural-gas prices are up almost 30% year-to-date. The
commodity is set to end the year with the biggest gains among the 22
commodities in the Dow Jones-UBS Commodity Index, which is down 9.3% for
the year.
"I think the key is people booking profits ahead of the new
year" after seeing such a dramatic price gain in recent weeks, said Bob
Yawger, director of futures for Mizuho Securities USA Inc.
Unusually large amounts of natural gas have been withdrawn
from storage in recent weeks, a sign of strong demand. Inventories as of
Dec. 20 stood at 3.071 trillion cubic feet, 16% below the exceptionally
high year-ago level and 9.2% below the five-year average for the week.
The EIA is set to release its report for the week ended Dec. 27 on Friday at 10:30 a.m. EST.
Money managers, including hedge funds, pension funds and
managed-money funds, held 134,670 more bets on rising natural gas prices
than on falling prices Dec. 24, the largest such position since at
least June 2006, according to the Commodity Futures Trading Commission.
"The natural-gas position was loaded up pretty good," Mr.
Yawger said. "People are uncomfortable going home with such a large spec
position on the books" ahead of a midweek holiday.
Colder-than-normal weather is forecast to continue in the next
six to 10 days, especially in the Midwest and East Coast, key markets
for natural-gas-powered heating, according to Commodity Weather Group
LLC, a private forecaster based in Bethesda, Md.
However, the forecasts for 11 to 15 days out are now showing
warmer weather than previously expected, which could reduce need for
natural gas to power indoor heating in homes and offices.
Natural gas for next-day delivery at the benchmark Henry Hub
in Louisiana recently traded at $4.325/mmBtu, according to
IntercontinentalExchange, versus Monday's average of $4.40/mmBtu.