Natural Gas Rises to 4-Week High on Above-Forecast Supply Drop

Natural gas futures climbed to a four-week high in New York after a government report showed that U.S. stockpiles fell by more than forecast last week.

Gas advanced 0.8 percent after the Energy Information Administration said inventories slid 45 billion cubic feet in the week ended Nov. 15 to 3.789 trillion. Analyst estimates compiled by Bloomberg showed a withdrawal of 38 billion cubic feet while a survey of Bloomberg users predicted a decrease of 40 billion.

“This was a pretty impressive withdrawal,” said Aaron Calder, an analyst at Gelber & Associates in Houston. “The U.S. weather models are going to get colder and colder as we move forward into the winter.”

Natural gas for December delivery rose 2.8 cents to $3.702 per million British thermal units on the New York Mercantile Exchange, the highest settlement since Oct. 25. Volume was 14 percent above the 100-day average at 2:45 p.m. The futures have climbed 10 percent this year.

The discount of December to January futures eased 0.1 cent to 3.8 cents. March gas traded 1.3 cents above the April contract, compared with 1.6 cents yesterday.

January $4.60 calls were the most active options in electronic trading. They were down 0.1 cent at 0.4 cent per million Btu on volume of 625 at 3:09 p.m. Calls accounted for 54 percent of trading volume.

Supply Report

The stockpile decrease was bigger than the five-year average decline for the week of 2 billion cubic feet, department data show. A surplus to the five-year average narrowed to 0.4 percent from 1.5 percent the previous week. Supplies were 2.3 percent below year-earlier inventories, compared with 2 percent in last week’s report.

“Production is on the rise, but demand is also ramping up quickly as we head deeper into the winter heating season,” Mike Tran, an analyst at CIBC World Markets Inc. in New York, said in a note to clients today. 

Natural gas production from the Marcellus shale formation in the U.S. Northeast may increase 3.3 percent in December to 12.9 billion cubic feet a day from an estimated 12.5 billion in November, the EIA said Nov. 12 in its monthly Drilling Productivity Report.

MDA Weather Services in Gaithersburg, Maryland, predicted colder-than-normal weather in the eastern two-thirds of the U.S. through Dec. 5.

Cold Weather

The low in New York on Nov. 27 may be 26 degrees Fahrenheit (minus 3 Celsius), 12 less than average, according to AccuWeather Inc. in State College, Pennsylvania. The low in Chicago may also be 26 degrees, 3 lower than normal.

About 49 percent of U.S. households use gas for heating, according to the EIA, the Energy Department’s statistical arm.

The U.S. may have 1.3 percent more heating-degree days, a measure of weather-driven energy demand, from November to March compared with the same period last year, Commodity Weather Group LLC in Bethesda, Maryland, said in an Oct. 15 seasonal outlook.

“There’s going to be increasing demand for natural gas down the road,” said Phil Flynn, a senior market analyst at Price Futures Group in Chicago.

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

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.