Natural Gas Falls as Midday Weather Outlook Trends Warmer

Natural gas futures retreated from a one-month high in New York as signs of warmer weather signaled reduced heating-fuel demand.

Gas declined 0.9 percent. Midday weather models pointed to higher temperatures in the East, South and Midwest, said Matt Rogers, president of Commodity Weather Group LLC in Bethesda, Maryland. Prices rose in earlier trading amid forecasts for a late winter storm next week.

“The fundamentals of the market don’t point to higher price levels unless there’s higher seasonal demand,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

Natural gas for April delivery fell 3 cents to settle at $3.456 per million British thermal units on the New York Mercantile Exchange. Trading volume was 17 percent below the 100-day average at 3:09 p.m. Prices reached $3.486 yesterday, the highest settlement since Jan. 23. Futures rose 5 percent this week and are up 3.1 percent this year.

Temperatures may trend warmer beginning March 8 in the U.S. Midwest and East Coast, according to MDA Weather Services. The Gaithersburg, Maryland, forecaster said temperatures in Chicago may reach a high of 47 degrees Fahrenheit (8 Celsius) that day, compared with 34 degrees on March 4.

April $3.50 calls were the most active gas options in electronic trading. They fell 1.8 cents to 9 cents per million Btu at 2:32 p.m. as 761 contracts were exchanged. Calls accounted for 56 percent of options volume.

Gas Production

About 50 percent of U.S. households use gas for heating, according to the Energy Information Administration, the Energy Department’s statistical division.

Natural gas output in the lower-48 states was 72.7 billion cubic feet a day in December, the EIA said in its monthly EIA-914 report yesterday. Production was up 0.6 percent from December 2011, the smallest annual gain since 2009.

Gas production rose to a record 28.5 trillion cubic feet in 2011, led by record output from shale deposits, the EIA said in an annual report on Jan. 7.

Inventories of the heating fuel fell 171 billion cubic feet to 2.229 trillion cubic feet in the week ended Feb. 22, the EIA said yesterday.

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 EIA said in its Feb. 12 monthly Short-Term Energy Outlook.

Gas rigs declined by eight to 420, the lowest level of 2013, according to data posted today on Baker Hughes Inc. (BHI)’s website.

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, government data show. If the trend continued through 2012, it will be the highest level of self-sufficiency since 1991.

To contact the reporter on this story: Kenneth Christensen in New York at kchristense9@bloomberg.net

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

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