Natural gas prices rally 2% as major winter storm heads for Northeast

Investing.com - Natural gas futures rallied sharply in the first trading session of 2014 on Thursday, as a late-season winter storm was headed to the U.S. Northeast, prompting expectations for increased demand for heating.

On the New York Mercantile Exchange, natural gas futures for delivery in February traded at USD4.311 per million British thermal units during U.S. morning trade, up 1.9%. Nymex February gas futures rose by as much as 2.3% earlier to hit a daily high of USD4.331.

Natural gas futures were likely to find support at USD4.195 per million British thermal units, the low from December 17 and resistance at USD4.447, the high from December 31. There was no floor or electronic trading on Wednesday because of the New Year’s Day holiday.

Trading volumes are expected to remain light due to the holiday period, reducing liquidity in the market and increasing volatility, which can help exaggerate market moves.

According to the U.S. National Weather Service, parts of southern New England and eastern/southeastern New York may experience a period of heavy snow with blustery winds early Friday.

The NWS predicts as much as eight inches of snow will fall in New York City, while Boston is expected to see up to 14 inches. Wind gusts could reach speeds of 45 miles per hour, and many areas will see temperatures 20 to 30 degrees below normal, it said.

Colder-than-average winter temperatures increase the need for gas-fired electricity to heat homes, boosting demand for natural gas. The heating season from November through March is the peak demand period for U.S. gas consumption.

U.S. supply levels also remained in focus. Total U.S. natural gas storage stood at 3.071 trillion cubic feet as of last week, approximately 16% below last year's unusually high level and nearly 9% below the five-year average for this time of year.

Early withdrawal estimates for this Friday’s storage data range from 110 billion cubic feet to 150 billion cubic feet, compared to a drop of 126 billion cubic feet during the same week a year earlier. The five-year average change for the week is a decline of 121 billion cubic feet.

Nymex natural gas prices have been well-supported in recent weeks, as chilly early winter weather helped drive prices to a two-and-a-half year high of USD4.578 on December 23. Nymex gas prices ended 2013 with a gain of nearly 22%, the biggest annual increase since 2005.

Elsewhere on the NYMEX, light sweet crude oil futures for delivery in February tumbled 2.1% to trade at USD96.35 a barrel, while heating oil for February delivery slumped 1.5% to trade at USD3.018 per gallon.