Relatively tight supplies and forecasts for more cold weather sent natural gas prices over $6 per million BTUs on Wednesday for the first time since January of 2009. And while the high prices are not expected to last, the next couple of weeks could see even bigger jumps as cold weather once again settles in over the Midwest and Northeast.

Prices for West Texas Intermediate (WTI) crude also rose again to nearly $103 a barrel shortly before noon. The crude price hike anticipates a drop in the nation’s inventories will be reported tomorrow by the U.S. Energy Information Administration. The report normally would have been released Wednesday, but the Presidents’ Day holiday delayed it until Thursday, when it will be released right after the report on natural gas storage.

A Bloomberg survey expects crude inventories to rise by 2 million barrels, but distillate supplies (diesel fuel and heating oil) are expected to shrink by 2 million barrels. Crude stockpiles at Cushing, Okla., the delivery point for WTI crude, have probably fallen since the southern leg of the Keystone Pipeline system began delivering crude to Gulf Coast refineries. That by itself should not affect the overall inventory, which by definition includes crude oil in transit whether by pipeline, rail or truck.

Like the crude market, the natural gas market is backwardated with cash prices well above forward prices. There is no demand from producers for more storage when this condition occurs, and, perhaps worse for consumers, all 11 forward contracts through February of 2015 also show no positive returns to storage of natural gas. Energy economist Philip Verleger has noted that there is no record of this kind of market over the past 23 years.

Demand for natural gas for electricity generation is likely to decline as those plants than can do so will switch to coal. Fuel-switching will also help moderate natural gas prices, but the days when the price fell below $3 per million BTUs are probably behind us, if not forever, at least for the next year or more.

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