Natural Gas Rises Second Day on Winter Storm, Ukraine Escalation

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Natural gas is flared near an electric pumping unit at a crude oil well site outside South Heart, North Dakota.

Natural gas rose for a second day amid speculation that a winter storm moving from the U.S. Midwest to Northeast will boost heating demand and as Russia’s incursion into Ukraine escalated geopolitical tension.

Futures for April delivery climbed as much as 2.8 percent to $4.736 per million British thermal units on the New York Mercantile Exchange and were at $4.722 at 10:36 a.m. Singapore time. The contract gained 2.2 percent to settle at $4.609 on Feb. 28, snapping a four-day losing streak. The volume of all futures traded was about 28 percent above the 100-day average.

A weather system bringing ice and snow across the Tennessee and Ohio valleys will shift toward the U.S. East Coast, said the National Weather Service. “Severe” cold will continue over the upper Midwest and a major winter storm is forecast for the central and eastern sections of the country, it said.

“Ol’ Man Winter is making it very clear who’s boss in the weather department,” according to the service in College Park, Maryland. “The extremely cold temperatures continue like a broken record across the Northern Plains, Upper Midwest, and Great Lakes, which has been the case for much of the winter.”

Gas and oil futures are advancing after Russia seized Ukraine’s Crimea region. The standoff intensified as the former Soviet state put its forces on combat readiness and hundreds of unidentified gunmen surrounded a Crimean army base.

Brent crude increased as much as $2.17, or 2%, to $111.24 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate oil was up as much as 2 percent to $104.65 in electronic trading in New York.

‘Incredibly Nervous’

“The market will be incredibly nervous and that caution should push prices higher,” Ole Hansen, a strategist at Saxo Bank A/S Copenhagen, said by phone yesterday before the resumption of trading today.

Ukraine is the main conduit for natural gas supplies to Europe from Russia, the world’s largest energy exporter. Wholesale gas surged in January 2009 after the government in Moscow halted pipeline deliveries amid a dispute over prices and transit terms.

The U.S. is “inoculated” from the conflict as increased gas and oil production bolsters its energy independence, according to Stephen Schork, the president of the Schork Group Inc., an energy adviser in Villanova,Pennsylvania. “While it could certainly have ramifications for Russian oil, I don’t see this being an issue” in the U.S., he said yesterday.

U.S gas inventories totaled 1.348 trillion cubic feet in the week ended Feb. 21, the lowest for the time of year since 2004, data from the Energy Information Administration show. Stockpiles were at a record deficit of almost 35 percent to the five-year average, said the Energy Department’s statistical arm.