(Jan 27): US natural gas fell as traders took profits after prices shot up nearly 30% on Monday, amid freezing temperatures that covered vast swathes of the country and pushed up heating demand.
Contracts for February delivery declined as much as 3.9% to US$6.532 per million British thermal units at 7:42am London time Tuesday. Gas has surged more than 117% in the five days through Monday, the biggest such gain in data going back to 1990.
Freezing weather is sweeping across much of the US, putting strain on electricity grids and driving up demand for the heating and power-plant fuel. The storm knocked out about 12% of the country’s natural gas production, limiting supplies to the power sector and home furnaces.
PJM Interconnection LLC, the operator of the largest US grid that serves 67 million people from New Jersey to Chicago, declared a level-1 emergency for Tuesday, which means every power plant that serves the region is required to be ready to run at full capacity. The Energy Department authorised the grid, along with some units of Duke Energy Corp, to divert some power from data centres, factories and other large facilities to ensure supplies at households and hospitals.
The winter storm is also coinciding with the February contract’s expiration on Wednesday, leaving liquidity relatively thin and amplifying the impact on front-month futures. The more actively traded March contract dropped as much as 5.9% to US$3.668 per million Btu on Tuesday.
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