Prices rose toward their highest level in nearly two years, extending recent rally.
Natural-gas prices rose to their highest level in more than a year and a half on Monday, extending a recent rally with traders preparing for colder temperatures and assessing the impact of weather-related supply disruptions.
Natural-gas futures for November delivery advanced 5.1% to $2.881 a million British thermal units, recording their highest close since March 2019. Prices have rallied about 14% so far this month and are up roughly 60% in the past three months, with recent gains coming ahead of the winter heating season.
Demand for the power generation typically soars in the colder months as more people use natural gas to heat their homes.
At the same time, investors were weighing the damage from Hurricane Delta, which made landfall as a Category 2 storm in coastal Louisiana on Friday and forced energy companies to shut in some natural-gas production ahead of the storm.
The combination of lower supply and rising consumption is driving bullish sentiment in the notoriously volatile market, particularly as the latest forecasts point to colder weather across much of the U.S. in the next few weeks.
“The cool shot late this week and through most of the 6-10 day [forecast] comes in stronger than expectations from last week,” Commodity Weather Group analysts said in a note.
Hedge funds and other speculative investors have ramped up optimistic natural-gas bets and cut back on bearish wagers in recent weeks, pushing net bullish bets around their highest level in 1 1/2 years, Commodity Futures Trading Commission data show.
Traders were looking ahead to the latest data on U.S. inventories slated for Thursday. For much of the past two years, stubbornly high stockpiles have signaled plentiful supply and halted any natural-gas price rallies.
The latest Energy Information Administration data for the week ended Oct. 2 showed stockpiles were 13% above their levels from a year earlier and 11.5% above the five-year average levels for this time of year.
However, analysts say the disruptions from Hurricane Delta and cold temperatures could lead to smaller-than-normal additions to stockpiles in the next few weeks, potentially setting up a bullish winter period that normally sees inventories fall.
Still, some traders remain cautious about the long-term outlook for natural gas, with the global economy recovering from the coronavirus pandemic and demand remaining stagnant in parts of the world. Prices have often surged around cold-weather periods, only to fall soon after as demand slides and producers ramp up output to take advantage of higher prices. Storm-related supply snags and price rallies also are often short-lived.
Elsewhere in commodities Monday, U.S. crude-oil prices slid 2.9% to $39.43 a barrel, continuing a monthslong stretch of trading around $40 with the coronavirus limiting fuel demand. Traders were weighing the prospect of higher supply after production restarted at Libya’s largest oil field over the weekend and a worker strike that had impacted output in Norway ended.