Natural Gas Futures Jump to Five-Month High on Cold Weather

Natural gas futures climbed to a five-month high on forecasts for colder weather that would boost demand for the heating fuel and deplete inventories.

Gas gained 0.8 percent as Commodity Weather Group LLC said the weather may be colder than normal across most of the lower-48 states from Dec. 7 through Dec. 11. A government report today showed that gas inventories slid 13 billion cubic feet in the week ended Nov. 22 to 3.776 trillion cubic feet, matching analyst estimates compiled by Bloomberg.

“The storage number was more or less within expectations, but it’s a pretty good withdrawal and the weather reports are looking very bullish,” said Phil Flynn, a senior market analyst at Price Futures Group in Chicago. “The market is looking ahead to an even bigger withdrawal next week.”

Natural gas for January delivery rose 3.1 cents to $3.895 per million British thermal units on the New York Mercantile Exchange, the highest settlement since June 19. Volume was 17 percent below the 100-day average at 2:38 p.m. The futures have advanced 16 percent this year.

The discount of January to February futures narrowed 0.2 cent to 0.4 cent. March gas traded 3.6 cents above the April contract, compared with 2.9 cents yesterday.

February $3 puts were the most active options in electronic trading. They were 0.1 cent lower at 0.5 cent per million Btu on volume of 11,705 at 2:55 p.m. February $5.15 calls dropped 0.6 cent to 0.5 cent on volume of 11,700. Puts accounted for 52 percent of trading volume.

Supply Report

The stockpile decrease was smaller than the five-year average decline for the period of 15 billion cubic feet, the Energy Information Administration data showed. A surplus to the five-year average widened to 0.5 percent from 0.4 percent the previous week. Supplies were 2.6 percent below year-earlier inventories, compared with 2.3 percent in last week’s report.

“While arguably near average and therefore neutral, we view the report as constructive, a larger draw than it might have been and no offset to the larger net withdrawals anticipated for the weeks ahead, as colder temperatures boost heating demand,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said in a note to clients today.

The low in Chicago on Dec. 7 may be 15 degrees Fahrenheit (minus 9 Celsius), 10 less than average, according to AccuWeather Inc. in State College, Pennsylvania. Temperatures in Cleveland may fall to 20 degrees, 12 lower than usual.

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 3.4 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 said in a Nov. 25 seasonal outlook.

The number of rigs drilling for gas in the U.S. fell by two from last week to 367, according to data released today by Baker Hughes Inc. in Houston. The total is down 14 percent this year.

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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