Early winter forecasts sent natural-gas prices swinging up and down last week as traders tried to determine how much of the nation's stockpiles would be used this winter.
Some concern still lingers over natural-gas supplies, which were depleted last winter and remain below a five-year average despite record weekly additions to the nation's stores, analysts said.
"The biggest thing was you had a shift in the weather and this has made people worry we are going to face another cold winter," said Michael Lynch, president of Strategic Energy and Economic Research Inc. "This time of the year where there's a lot more uncertainty about the weather, any indication that the weather may be more extreme in one way or another is going to cause a lot of movement."
Natural-gas prices rose Nov. 10 to $4.54 per 1 million British thermal units in anticipation of colder-than-average fall weather. It was the highest intraday natural-gas price since June.
"We saw ... natural gas go up nine days in a row because of the anticipation of the storm," said Phil Flynn, an energy analyst with Price Futures Group in Chicago. "I think people are concerned about how cold and how early it is. This is like January in November."
Natural-gas prices began to fall during the week as forecasts showed milder weather later this winter, said Steve Mosley, a commodity trading adviser in Maumelle. Then prices for December climbed 1.1 percent Friday to $4.02 per 1 million Btu on the New York Mercantile Exchange.
"It's still a question of what happens in the next couple months with the weather," Lynch said. "So far we are not seeing a big drawdown in inventories."
Energy companies increased drilling this year to replenish natural-gas stocks, which were at an 11-year low in the spring. About half of American households use natural gas for heating.
Supplies were 48 percent below the five-year-average at the end of last winter. Now they are 6.2 percent below the average, according to a weekly government report.
Natural-gas inventories increased 40 billion cubic feet to 3.61 trillion cubic feet, according to a report by the Energy Information Administration.
Inventories have grown quickly because of weak demand for natural gas this summer, new pipelines carrying the resource to market and record production in the United States, analysts said.
"A lot of the concern about storage has subsided," said Rick Margolin, a senior analyst with Genscape Inc. "We've had so much production this summer that most storage fields in the U.S. and Canada were able to replenish their storage levels."
Accelerated production is expected to continue this year, Margolin said.
"Inventories are lower than normal, but the concern is less than it was this summer because there is going to be so much more production this winter," Margolin said.
But Flynn cautioned that if we see another cold and long winter, prices could soar to $7 per 1 million Btu.
"I think people don't take into account the demand for natural gas has gone up," he said. "Last year we went into the season with almost record supplies. And then, of course, we used more then we ever did before."
SundayMonday Business on 11/17/2014