Gas News Mon, 11 Dec 2000, 11:44am EST

12/11 10:54 Natural Gas Climbs as Blizzard Boosts Heating Demand in Midwest By Bradley Keoun

New York, Dec. 11 (Bloomberg) -- Natural gas surged 15 percent to a record as a Midwest blizzard increased demand for the heating fuel at a time when inventories are well below year-ago levels.

The storm bore down on Illinois, pushing temperatures below freezing and dumping as much as a foot of snow in a region that is the largest market for gas heat in homes. With the cold spell expected to last several days, utilities were bidding top dollar for gas to meet rising demand, analysts said. U.S. inventories of natural gas are 17 percent lower than they were a year ago.

``We're still early in the heating season,'' and gas suppliers ``don't want to go too deeply into their inventories,'' said Jim Ritterbusch, president of Galena, Illinois-based energy consulting firm Ritterbusch & Associates Inc.

Natural gas for January delivery rose as much as $1.276 to $9.86 per million British thermal units on the New York Mercantile Exchange, the highest price in 10 years of futures trading on the Nymex. In recent trading, the contract was up 81.6 cents at $9.40 per million British thermal units.

Prices have risen 45 percent this month and have almost quadrupled from what they were a year ago on concern that inventories will be too low to avoid shortages this winter.

Contributing to the boom in prices has been rising demand from manufacturers and power producers, and a lack of increased supply from domestic wells and from Canada.

Storage depots held an estimated 2.429 trillion cubic feet of gas on Dec. 1, according to the American Gas Association, the lowest level for that time of year since the AGA began tracking inventories in 1994. Supplies are down from 2.932 trillion cubic feet a year ago.

A cold front out of the Mississippi Valley was expected to spread heavy snow, sleet and freezing rain across much of the Midwest today, the Weather Channel said. Heavy snow was expected to stretch from northeastern Missouri to central Michigan.

Temperatures in the north-central U.S. are expected to average almost 6 degrees Fahrenheit (3 Celsius) below normal in the next seven days, according to Weather Derivatives of Belton, Missouri.

The region including Illinois, Indiana, Michigan, Ohio and Wisconsin leads the nation in residential gas usage, accounting for about 30 percent of all gas delivered each year to American households, according to the U.S. Energy Information Administration.

Prices may go higher, as some gas distributors and industrial users buy futures contracts to protect themselves against further increases in January and February, when demand typically peaks, Ritterbusch said.

``This market just looks solid,'' he said.

http://quote.bloomberg.com/fgcgi.cgi?ptitle=Gas%20News&touch=1&T=energy_news_story.ht&s=AOjT4oxa5TmF0dXJh

-- Martin Thompson (mthom1927@aol.com), December 11, 2000

Answers

Dec. 11, 2000, 1:37PM

Natural gas prices zoom to record high Associated Press

Natural gas prices soared to a record high today as a snowstorm socked the Midwest and bitter cold was in the forecast for at least the next few days.

The soaring prices could almost immediately show up as increases in consumers' heating bills, analysts said.

Prices were up as much as 13 percent, hitting a high of $9.65 per 1,000 cubic feet in regular trading on the New York Mercantile Exchange after surging as high as $9.86 in electronic trading overnight.

Phil Flynn, vice president and senior energy analyst at Alaron Trading Corp. in Chicago, said a storm that was expected to dump up to a foot of snow on Chicago raised fears that utilities may not have enough natural gas stored up to get through a harsh winter.

Cold weather in the Pacific Northwest has also contributed to the rise in prices, he said.

"It's more of a psychological situation than a real situation right now," Flynn said. "I would expect that the first big break in the weather will bring a break in the market."

Natural gas, once thought of mainly as a source for winter heating, has become a year-round fuel used to generate the electricity that powers air conditioners and computers. But that rise in use has not been accompanied by an equal growth in capacity, so supplies are tight.

http://www.chron.com/cs/CDA/printstory.hts/front/769261

-- Martin Thompson (mthom1927@aol.com), December 11, 2000.