Large drawdown in gas supplies sparks price-spike

A big decline in the amount of natural gas in storage in the US along with damage to a major pipeline has led to natural gas futures surging.

The US Energy Information Administration today reported another weekly decrease in the US stockpile of natural gas. Gas in storage declined by a larger-than expected 237 billion cubic feet (bcf) to 1686 bcf. Stocks fell 262 bcf in the week prior.

According to the EIA the five-year average is a 162 bcf decrease at this time of year. Persistent, severely cold weather in many parts of the US has been driving supplies lower in recent weeks, as demand soars. Roughly half of US households are heated by natural gas, according to EIA data.

By mid-afternoon in New York, the price of natural gas futures had risen 7.19% to $5.175 per million British thermal units. The price of natural gas has climbed around 19% so far this year.

The price of natural gas had already been boosted today by news of an explosion at a key gas pipeline in southern Kentucky. The Columbia Gulf Transmission pipeline, which carries natural gas from the US Gulf Coast to the northeast and midwest of the country, has been forced to shut down. This comes at a difficult time with demand driven so high by wintry conditions.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.