Bitter cold weather across the northern tier of the U.S. expanded to the East Coast this week, and it is expected to remain frigid into early January.
"This is a substantial strengthening in the heating demand outlook. The cold weather system that was supposed to be limited to the northern Midwest has spread to the eastern part of the country," said John Kilduff, partner at Again Capital.
Natural gas futures for February were trading at $2.94 per million British thermal units, an increase of 7.4 percent on Thursday and more than 13 percent from a week ago. Recently, prices were as low as $2.56 last Thursday, close to the low of $2.522 of last February.
The U.S. has an abundant supply of natural gas, and warmer winter weather has kept prices depressed. Prices were higher Thursday morning but gained more momentum after the government reported a withdraw last week of 112 billion cubic feet of gas from storage, the second week of a triple digit withdraw.
Natural gas has been volatile within a relatively low range, and futures were trading as high as $3.22 a month ago. But winter weather failed to materialize until just recently, and now the outlook is for even colder weather.
"Now, we are seeing risks that some of the strongest cold could come again between Jan. 4 and 6 before gradually moving out," according to Jacob Meisel, chief weather analyst at Bespoke Weather. He said there's potential for a warmer period in mid-January, with the coldest period expected Jan. 4 to 6.