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Natural Gas Rises as Cold Weather May Erode Inventory Surplus

Natural gas futures gained for a third day in New York amid forecasts of below-normal temperatures that may reduce a glut of the fuel in storage.

Gas climbed 0.2 percent. The weather may be cooler than normal in the Northeast through Oct. 14, according to MDA EarthSat Weather. An Energy Department report tomorrow may show that stockpiles rose 78 billion cubic feet last week, below the five-year average increase of 84 billion, based on the median of 20 analyst estimates compiled by Bloomberg.

“Anticipation of winter weather continues to underpin the level of gas prices we’ve reached,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “We continue to erase the inventory surplus.”

Natural gas for November delivery rose 0.8 cent to settle at $3.475 per million British thermal units on the New York Mercantile Exchange. The futures have gained 16 percent in 2012.

December $4.50 calls, bets that prices will rise, were the most active gas options in electronic trading. They were unchanged at 2 cents on volume of 661 contracts as of 2:43 p.m. Calls accounted for 57 percent of options volume.

The high in New York on Oct. 12 may be 62 degrees Fahrenheit (17 Celsius), 3 below normal, according to AccuWeather Inc. in State College, Pennsylvania. The high in Chicago may be 55 degrees, 9 less than the usual reading.

Heating demand in the U.S. may be 35 percent above normal on Oct. 12, data from Weather Derivatives in Belton, Missouri, show. About 51 percent of U.S. households use gas for heating, according to the Energy Department.

Peak Demand

The heating season from November through March is the peak demand period for U.S. gas consumption. Last winter was the fourth-warmest on record in the lower 48 states, cutting fuel consumption. About 50 percent of U.S. households use gas for heating, according to the Energy Department.

The winter of 2012-2013 will probably bring a boost to heating fuels compared with last year and leave above-normal snowfall from Massachusetts to Alabama, AccuWeather Inc. said.

The coldest part of the winter will probably be in February, with slightly warmer-than-average weather in December that may bring the entire season near normal, said Paul Pastelok, long-range forecaster for AccuWeather in State College, Pennsylvania.

Gas stockpiles totaled 3.653 trillion cubic feet in the week ended Sept. 28, 8.3 percent above the five-year average for the week, according to the Energy Department. The surplus has been declining since March.

U.S. natural gas production in 2012 will average 68.85 billion cubic feet a day, the department said today in its monthly Short-Term Energy Outlook. The estimate was little changed from 68.86 billion in last month’s report.

Gas Boom

The boom in oil and natural gas production helped the U.S. cut its reliance on imported fuel. America met 83 percent of its energy needs in the first six months of the year, department data show. If the trend goes on through 2012, it will be the highest level of self-sufficiency since 1991.

Demand from electricity generators will average 25.36 billion cubic feet a day, up from 25.21 billion forecast in September, according to the report. Gas use by power plants will climb 22 percent this year.

The number of rigs drilling for gas rose by 2 to 437 last week, according to data released Oct. 5 by Baker Hughes Inc. in Houston. The rig count is down 46 percent this year.

Gas futures volume in electronic trading on the Nymex was 387,803 as of 2:41 p.m., compared with the three-month average of 383,000. Volume was 513,244 yesterday. Open interest was 1.19 million contracts. The three-month average is 1.11 million.

The exchange has a one-business-day delay in reporting full volume and open interest data.

To contact the reporter on this story: Christine Buurma in New York at cbuurma1@bloomberg.net;

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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