Natural Gas Fluctuates Near 2-Week High on Cold Weather View

Natural gas futures fluctuated near a two-week high in New York amid forecasts of below-normal temperatures that would increase heating-fuel consumption.

Gas moved between gains and losses as MDA Weather Services in Gaithersburg, Maryland, predicted mostly colder-than-average weather in the eastern half of the U.S. from March 3 through March 7. The futures gained 3.7 percent to settle at $3.414 per million British thermal units yesterday, the highest closing price since Feb. 6.

“We’re seeing a little bit of follow-through from yesterday’s big run,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.

Natural gas for March delivery fell 0.7 cent to $3.407 per million British thermal units at 9:53 a.m. on the New York Mercantile Exchange. The futures are up 34 percent from a year ago. Trading volume was 22 percent above the 100-day average for the time of day.

The March gas contract expires today. The more actively traded April contract slid 2.1 cents, or 0.6 percent, to $3.449 per million Btu.

April $3.50 calls were the most active gas options in electronic trading. They fell 1.3 cents to 9.8 cents per million Btu on volume of 262 contracts as of 9:49 a.m. Calls accounted for 53 percent of options volume.

The low in New York on March 3 may be 29 degrees Fahrenheit (minus 2 Celsius), 3 less than usual, according to AccuWeather Inc. in State College, Pennsylvania. The low in Chicago may be 23 degrees, 4 below normal.

Inventory Report

About 50 percent of U.S. households use gas for heating, data from the Energy Information Administration show. The agency is part of the Energy Department.

The EIA’s weekly stockpile data, due Feb. 28 at 10:30 a.m. in Washington, may show supplies fell by 165 billion cubic feet in the week ended Feb. 22, according to the median of four analyst estimates compiled by Bloomberg. The five-year average change for the week is a decrease of 118 billion. Last year, inventories slid by 106 billion during the period.

Supplies totaled 2.4 trillion cubic feet in the week ended Feb. 15, 18 percent above the five-year average and 9.2 percent below levels a year earlier.

Marketed gas production will average a record 70.02 billion cubic feet a day this year, up 1.1 percent from 2012, as output from the Marcellus shale formation in the Northeast grows, the Energy Information Administration said in its monthly Short-Term Energy Outlook, released Feb. 12 in Washington.

Henry Hub

Gas prices at the benchmark Henry Hub in Erath, Louisiana, will average $3.53 per million British thermal units in 2013, compared with $2.75 per million Btu last year, the agency said.

Stockpiles of the fuel may total about 2 trillion cubic feet at the end of March, down from 2.477 trillion at the same time last year, according to the report.

The boom in oil and natural gas production helped the U.S. cut its reliance on imported fuel. America met 84 percent of its energy needs in the first 11 months of last year, on pace to be the highest annual level since 1991, EIA data show.

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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