Price of Natural Gas Jumps 38% as Temperatures, Supplies Dip

The price of natural gas surged 38% on Monday to its highest level in more than two years as concerns about supplies and cold weather prompted a flurry of buying on the New York Mercantile Exchange.

“The weather keeps staying cold, and gas in storage keeps going down,” said Ron Gist, an analyst at Houston-based energy consultancy Purvin & Gertz. “I think that what finally happened is that the dam burst.”

The March futures contract, which expires Wednesday, closed Monday at $9.137 per 1,000 cubic feet, up $2.531.

Analysts said the increase might also have been due to traders who had expected earlier that prices would drop and who now had to cover their bets before the contract expired. The difference could be seen in the April contract, which closed Monday at $7.622 per 1,000 cubic feet.

In January 2001, the front-month contract averaged $8.06 per 1,000 cubic feet.

The Energy Department’s statistical arm, the Energy Information Administration, said Thursday that nationwide inventories declined 15%, or 203 billion cubic feet, to 1.17 trillion cubic feet for the week ended Feb. 14. That compared with 2.04 trillion cubic feet a year earlier.

On Monday, traders also worried that cold weather in the Rocky Mountain region eventually would reach the East Coast, which already is experiencing high demand, and higher prices, for heating oil, Gist said.

“The local distribution companies are faced with a tight market,” he said.

Tom Kloza, an analyst at Oil Price Information Service, a Lakewood, N.J., publisher of industry data, said the buying was not unique to the futures market.

“Some companies had to put in bids of $28 [per 1,000 cubic feet] on the cash market, or gas for immediate delivery,” he said.

Kloza said there also has been talk among traders that some suppliers are having difficulty meeting delivery schedules and that pipelines may be in need of more product to maintain minimum levels of pressure needed to move the natural gas through the distribution system.

“It shows you what a cold winter will do,” Kloza said.