Natgas Futures Soar on Increasing Demand

November 28, 2016 5:08AM CST

Cooler temperatures are adding to the fire in natural gas futures prices in recent days. Prolonged fall-like weather with some unseasonably warm days have, until now, lessened the need for heat in homes, but the atmosphere is changing.

The January contract in natural gas futures burned higher, up 3.47 percent at $3.313 in Monday’s mid-morning commodities futures trading session. The December contract in natural gas futures expired today.

More winter temperatures will likely hit the U.S. next month.  Cold weather is not unexpected in December, but demand for natural gas will rise and as less coal is used for heating, prices in the natural gas futures contract will continue to strengthen. About half of U.S. homes use natural gas for heat, making winter weather the most-common driver for demand and prices.

Some commodities futures markets analysts within the energy sector say systemic changes in the natural gas market could lead to prices of $4.50 within about 18 months.

Last week, natural gas futures were on the rise after the U.S. Energy Information Administration reported that supplies fell by 2 billion cubic feet for the week ended November 18. Most analysts had expected an increase of 2 billion cubic feet.

Elsewhere in the energy futures sector, crude oil futures prices fluctuated on a possible production deal from OPEC.

A lack of economic news is contributing to a subdued session in commodities futures markets on Monday, and as the markets gear up for a full week of trading after last week’s U.S. Thanksgiving Day holiday.

The calendar for the remainder of the week is filled with reports of importance to the commodities futures markets. Tuesday includes third-quarter GDP as well as the November Consumer Confidence report. Wednesday brings October Personal Income and Spending, the Core PCE Price Index for the same month, and the November Chicago Purchasing Managers Index.  October Pending Home Sales and the Fed’s November Beige Book is also due for release. On Thursday, the November Institute for Supply Management Index is due for release, as well as Auto and Truck Sales data for November.

The week ends with the November Employment report, which will be closely watched for clues to strength in the economy and moves from the Federal Reserve. The Fed meets in December, but many commodities futures markets analysts do not believe the central bank will raise interest rates to avoid disrupting consumer spending over the holidays.

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