US natural gas futures hit an over two-year high and jumped nearly 3 percent on Tuesday on colder weather forecasts for January. Front-month gas futures for January delivery on the New York Mercantile Exchange rose 9.9 cents or 2.7 percent to settle at $3.761 per million British thermal units.
The futures contract hit a high of $3.778 earlier in the session, the highest since December 2014. "This market continues to be driven higher by bullish weather forecasts that are now seeing extension out to about the 10th of next month," said Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates. The front month has had a volatile run for the past several weeks. It rose over 7 percent last week, but dropped 9 percent a week before. It is up nearly 12 percent so far this monthh on a colder weather outlook Longer term, the latest weather models forecast slightly colder-than-normal temperatures in January and February before turning warmer than normal in March.
"Prices are likely to remain volatile and sensitive to the 11-15 day temperature forecast in our view," Tim Evans, Citi Futures' energy futures specialist, said in a note. Thomson Reuters projects US gas demand at 90.4 billion cubic feet per day on average temperatures leading into New Year's holiday weekend and rise to 101.3 bcfd, next week on colder weather.