Natural Gas Rises on Speculation of Above-Average Stockpile Drop

Natural gas advanced from a one-week low in New York on speculation that a government report tomorrow will show a bigger-than-average stockpile decline.

Gas rose 0.4 percent on forecasts that U.S. supplies probably fell by 176 billion cubic feet last week, based on the median of 11 analyst estimates compiled by Bloomberg. The five-year average decline for the period is 125 billion. Temperatures in parts of the Northeast and Midwest were below normal for most of the seven days, according to AccuWeather Inc.

“We should see at least a triple-digit withdrawal,” said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami. “When people start doing a comparison to prior years, it’s going to show a healthy withdrawal and that is bullish.”

Natural gas for January delivery gained 1.7 cents to settle at $4.433 per million British thermal units on the New York Mercantile Exchange after sliding to $4.377, the lowest intraday price since Dec. 19. Trading volume was 51 percent below the 100-day average at 2:48 p.m. Gas is up 32 percent this year, heading for the biggest annual increase since 2005.

The discount for January futures to February narrowed 1 cent to 4.3 cents. March gas traded 22.1 cents above the April contract, compared with 27 cents on Dec. 24.

May $7 calls were the most active options in electronic trading. They were steady at 0.6 cent per million Btu on volume of 1,253 at 3:16 p.m. Calls accounted for 59 percent of trading volume.

January options expire today and futures for the month will expire tomorrow.

Stockpile Decline

The Energy Information Administration, the statistical arm of the Energy Department, is scheduled to release its weekly gas inventory report at 10:30 a.m. tomorrow, a day later than usual because of Christmas. Estimates for the seven days ended Dec. 20 ranged from declines of 163 billion to 192 billion cubic feet. Supplies dropped 74 billion the same week last year.

Stockpiles fell by 586 billion cubic feet in the five weeks ended Dec. 13, more than double the five-year average decline of 267 billion for the same period, EIA data show. Inventory levels dropped 285 billion in last week’s report, the largest decline in records going back to 1994, after a blast of arctic air.

Supplies in the week ended Dec. 13 tumbled to 3.248 trillion cubic feet, 7.4 percent below the five-year average, the widest deficit in records going back to 2005.

“We expect the robust draw for last week and the cold in the forward temperature to limit the downside,” Tim Evans, an energy analyst at Citi Futures and OTC Clearing in New York, said in a note to clients today.

Weather Outlook

Commodity Weather Group LLC said most of the lower 48 states would have seasonal weather over the next five days, keeping a blast of Canadian cold air from spreading southward until next week. Weather models show the prevailing pattern is for below-normal temperatures in the U.S. East from Dec. 31 through Jan. 9, Matt Rogers, president of the Bethesda, Maryland-based forecaster, said in a note to clients today.

The high temperature in New York City on Dec. 30 will be 42 degrees Fahrenheit (6 Celsius), 3 above normal, before plunging the next day to 29 degrees, 10 below the norm, according to AccuWeather Inc. in State College, Pennsylvania. Chicago’s high of 34 tomorrow will drop to 11 on Dec. 30, 21 below average.

The government’s midday Global System Forecast model was “in good agreement with the earlier runs,” signaling a strong outbreak of cold in the Midwest starting Dec. 30 that will push into the Northeast the following day or two, said Jim Southard, meteorologist with Frontier Weather Inc. in Tulsa, Oklahoma.

The highs in places including Minneapolis, which will be 20 to 25 degrees below normal early next week, will struggle to get above zero, said Southard. Northeast temperatures may be 10 to 15 degrees lower than usual, he said.

About 49 percent of U.S. households use gas for heating, EIA data show. The heating season from November through March is the peak demand period for the fuel in the lower 48 states.

To contact the reporter on this story: Naureen S. Malik in New York at nmalik28@bloomberg.net

To contact the editor responsible for this story: Bill Banker at bbanker@bloomberg.net

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