US natural gas futures jumped again last week as cold weather helped erase a stockpile surplus and Goldman Sachs raised its gas price forecast for this year by 17 per cent.
Gas rose as much as 4 per cent as MDA Weather Services predicted below-normal temperatures in north-central states this week, while Texas and the south-east will experience hotter than normal readings from April 15 to April 19. Unusually cold March weather pushed supplies below the five-year average for the first time since 2011 and prompted Goldman Sachs to raise its price estimate by 65¢ to an average $4.40 per million British thermal units.
"We have a little Friday surprise by Goldman," said John Woods, president of JJ Woods Associates and a New York Mercantile Exchange floor trader. "This market does have the potential to move upward. We have an extended period of cold weather and it has taken away the surplus we had."
Natural gas for May delivery rose 14.7¢, or 3.7 per cent, to $4.09 per million British thermal units on the exchange. Prices climbed 1.6 per cent last week in the seventh straight weekly increase, which is the longest such streak since October 2009.
"The cold weather in March means the 2012-13 winter will end up in line with historical averages, despite the mild weather in December," wrote Goldman Sachs analyst Johan Spetz.
The tightening supply-and-demand balance meant prices would have to move higher in the second half of the year to spur production growth after the summer, he said.
"We now expect prices will need to average $4.50 per million Btu in the second half of 2013 to bring on the production growth required to balance the market."
MDA forecasts show that unusually cold weather in parts of the midwest this week will shift westward by the middle of the month while the eastern half of the lower 48 states heats up.
The low temperature in Chicago by Friday may be 2 degrees, which is six below normal, according to AccuWeather.
Phil Flynn, senior market analyst at Price Futures Group in Chicago, said: "The fact that storage is below the five-year average, you are going to see prices go up."
US stockpiles fell by 94 billion cubic feet to 1.687 trillion cubic feet at the end of March, the Energy Information Administration said. Inventories typically start to increase from April through to October to prepare for the next heating season, the peak months for US gas consumption.
Mr Spetz estimated supplies at the end of October would peak at 3.65 trillion cubic feet, which EIA data shows would be the lowest level for the time of year since 2008.