Natural Gas Prices Hit 9-Month High

Natural gas prices continued to rocket Monday as cold weather in much of the East and Midwest ramped up demand.

Crude oil prices were pulled up as well.

Gas futures in New York had their biggest one-day rally in more than nine months as the near-term contract surged 76.7 cents, or 13%, to $6.902 per million British thermal units.

It was the highest closing price for a contract closest to expiration since March 7.

Because oil competes with gas as a fuel in the Northeast and elsewhere, crude oil prices often rise with gas. Near-term crude futures in New York jumped $1.37 to $32.10 a barrel.

U.S. gas prices were depressed for much of the 1990s as supplies rose and mild winters reduced demand. But the supply glut disappeared in 2000 and 2001 and prices soared. Gas plunged anew late in 2001, then zoomed again last winter because of colder-than-normal weather in much of the nation.

The latest jump in prices follows a severe winter storm across New England over the weekend. Colder weather and snow also are forecast this week for the Midwest, the nation’s biggest region for gas used in heating, the National Weather Service said.

Analysts say many utilities are scrambling to buy up more gas for winter reserves.

“When you get these early cold blasts [firms] try to save storage for later in the season,” said Jay Fletcher, manager of gas supply at Yankee Gas Services Co. in Berlin, Conn.

Gas prices moved up sharply last week after the onset of cold weather and an Energy Department report that showed a larger-than-expected decline in nationwide inventories.

U.S. utilities and industrial users pulled 59 billion cubic feet of gas from storage in the week ended Nov. 28, the government said. That left the inventory total at 3,095 billion cubic feet.

Utilities normally build up inventories each spring and summer, then draw them down in winter. Inventories recently crested at about the same level they have in past years, so there is little concern, so far, that gas supplies could run severely low this winter.

Recent price gains have been amplified as speculators who had “shorted” futures -- betting that prices would fall -- rushed to buy contracts to close out their bets, traders said.

Apart from speculators’ influences, a longer-term problem for the gas market is more limited production, analysts say.

“Production continues to be lower than year-ago levels,” said Peter Linder, an energy analyst with DeltaOne Capital Partners, an investment firm in Calgary, Canada.

Supplies of natural gas from Canada, the biggest exporter of the fuel to the U.S., were down 6.6% by the end of August from a year earlier, according to Canadian government statistics. Canadian gas exports dropped this year for the first time since the National Energy Board started keeping records in 1985.

Higher natural gas prices are a drain on consumers’ budgets. The government estimated on Monday that homeowners in the Midwest who heat with gas can expect to spend an average of $848 this winter for the fuel, 6.1% more than last winter.