By Mike Anderson  Feb 24, 2014 

Natural gas jumped to the highest price in five years as forecasters warned of more freezing U.S. weather. Hedge funds increased bullish bets on the heating fuel as inventories dropped to the lowest in a decade

Natural gas for March delivery rose as much as 5.6 percent to $6.478 per million British thermal units in electronic trading on theNew York Mercantile Exchange, the highest intraday price since Dec. 3, 2008. The contract was at $6.384 at 1:15 P.m. inSingapore, extending last week’s 18 percent gain. Thee volume of all futures traded was more than double the 100-day average.

“After a mild and pleasant weekend for many, winter will make a harsh return to much of the central and eastern U.S.,” the National Weather Service said in a report yesterday. The agency warned of possible record cold temperatures this week in the High Plains, Upper Midwest and Great Lakes areas.

Hedge funds increased bullish bets on natural gas, which has jumped 51 percent this year, for the fifth time in six weeks, U.S. Commodity Futures Trading Commission data show. U.S. gasstockpiles tumbled by 250 billion cubic feet to 1.443 trillion in the week ended Feb. 14, the least for that period since 2004, government data show.

“The storage situation and another round of cold weather are the two main drivers right now,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York. “The market is focused on end-of-season inventories. It’s a precarious situation, especially if we get a hot summer or any hurricane activity.”

Bullish Bets

Five of 11 analysts said gas prices will advance this week, according to a Bloomberg survey. Three analysts predicted gas will fall, and another three said prices will stay the same.

Money managers’ net-long positions, or wagers on rising prices, jumped 5 percent in the seven days ended Feb. 18, to the highest level since May, according to U.S. data. Bearish bets slid 7.3 percent to the lowest level in more than two years.

Net-long positions on four U.S. natural gas contracts held by money managers climbed by 20,872 futures equivalents to 442,009 in the week ended Feb. 18, the most since the week ended May 28, according to the CFTC. Long positions increased by 6,835, or 1.1 percent, while bearish bets slid 14,037 to 178,370, the lowest level since May 31, 2011.

Meteorologists are monitoring the possibility of “returning disruptive snow to the Northeast,” AccuWeather Inc. said in report yesterday. If a series of storms combine over the Northwest “snow would likely evolve near or along the I-95 corridor, leading to another round of disruptions to travel and daily routines,” it said.

About 49 percent of U.S. households use gas for heating, with the biggest consumers in the Midwest, U.S. Energy Information Administration data show.

Source:Bloomberg