Natural gas prices surged nearly 8 percent Thursday after the government reported that stockpiles dropped for the first time in nine months.
Winter storms spread across the Midwest as well, meaning some homeowners are turning up the heat for the first time in what has been a very mild winter to date.
Temperatures dropped to 10 degrees from Des Moines to Chicago, and frigid winds have forced chill values as low as negative 25 in parts of Wisconsin, Iowa and Illinois, according to the National Weather Service.
"The weather is a significant driver here," analyst and trader Stephen Schork said. "It's about as bullish as it can get this year."
That's unlikely to mean higher heating costs where natural gas is used.
Utilities have long since locked in cheap prices and that is passed on to homeowners. A number of utilities have already sent out notifications that rates are coming down.
Heating oil is another story because it generally follows the price of oil which has almost doubled this year. Futures contracts have jumped nearly 40 percent since February.
That nasty weather is heading toward the Northeast, the most prevalent region for heating oil use in homes. About 18 inches of snow is expected in parts of central and western New York.
While heating oil levels are a little tight right now, the mild winter combined with the worst economic downturn in generations has led to unprecedented levels of natural gas being placed in storage. Major energy consumers like manufacturers have cut back severely on power use.
Storage is above listed capacity in the West, and at or near capacity everywhere else.
The Energy Information Administration reported that levels finally dropped by 64 billion cubic feet last week, the first reported draw since the week of March 13.
Natural gas for January delivery jumped 37.5 cents, or nearly 8 percent, to $5.273 per 1,000 cubic feet on the New York Mercantile Exchange. Prices rose as high as $5.335 earlier in the day.
Benchmark crude for January delivery fell 19 cents to $70.48 on the Nymex. It is the seventh straight day of declining prices.
At the pump, retail gas prices dropped slightly overnight to a national average of $2.629 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded is 2.9 cents cheaper than last month but 94.6 cents more expensive than the same time last year.
In other Nymex trading in January contracts, heating oil lost less than a penny to $1.9042 while gasoline lost 1.04 cents to $1.8469 a gallon.
In London, Brent crude for January delivery gave up 20 cents to $72.19 on the ICE Futures exchange.
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