Oil, Natural Gas Prices Up on Cold Weather

WASHINGTON – Natural gas prices jumped to a new high Thursday and oil prices also climbed as cold weather across the U.S. Northeast, Midwest and elsewhere raised concerns about increased demand for home-heating fuels this winter.

But some brokers said they were stunned by the market’s apparent knee-jerk reaction to freezing temperatures and snow, chalking it up to speculative buying.

January natural gas futures surged by $1.20 to $14.90 per 1,000 cubic feet on the New York Mercantile Exchange – a new intraday high for the front-month contract. The previous record was $14.75 set when the December contract was the front month. The rally in natural gas helped fuel the runup in oil prices.

Light sweet crude for January delivery climbed $1.38 to $60.59 a barrel on Nymex. In London, January Brent crude gained 55 cents to $57.53 a barrel on the ICE Futures exchange.

A major winter storm was forecast for the Southeast and heavy snow was expected in the Northeast on Thursday, while temperatures in the Midwest were expected to warm. Many major cities in the Northeast will see heavy snowfall, although in some cities closer to the coast the snow will switch to a mix of rain and snow.

“This is February weather in December,” said Ed Silliere, a Nymex floor trader at New York-based Energy Merchant Intermarket Futures.

While there is enough natural gas in storage in the U.S. for a normal winter, Silliere said this early blast of frigid temperatures has made the market nervous about the possibility of a colder-than-normal winter.

But Mike Fitzpatrick, a broker at Fimat USA in New York, said Thursday’s rally “bears no reflection whatsoever to the fundamentals” of supply and demand and that the market was “building toward a big bust.”

“Speculation is the only thing I can point to,” Fitzpatrick added.

Heating oil futures jumped by almost 4 cents to $1.775 per gallon, while gasoline futures rose more than 5 cents to $1.6225 a gallon.

Oil and natural-gas production facilities in the Gulf of Mexico have partly recovered from damage earlier this year by hurricanes Katrina and Rita, but still have a long way to go. Almost a quarter of the region’s daily natural gas output, and a third of its oil output, is still down.

Speaking to journalists outside the White House, Energy Secretary Sam Bodman urged Americans on Thursday to conserve fuel to help offset soaring energy prices and the slow post-hurricane recovery of oil and natural gas production in the Gulf of Mexico.

The Energy Department recently predicted that households heating primarily with natural gas can expect to spend about 50 percent more this winter.