Natural Gas Declines on Outlook for Below-Average Supply Drop

Natural gas fell in New York, heading for a second consecutive weekly decline, before a government report that may show a below-average U.S. inventory drop.

Gas slid as much as 1.6 percent. Energy Information Administration data will probably show stockpiles fell by 114 billion cubic feet last week, based on the median of 20 analyst estimates compiled by Bloomberg. The five-year average decrease for the period is 121 billion and supplies dropped by 126 billion the same time last year.

“The big trend has been that we have been on this record pace of withdrawals and then all of the sudden last week we saw a dramatic slowdown,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “As we transition into January, it’s very difficult for the weekly injections to exceed the five-year average because January is typically so cold.”

Natural gas for February delivery slid 5.3 cents, or 1.2 percent, to $4.268 per million British thermal units at 9:34 a.m. on the New York Mercantile Exchange. Trading volume was 43 percent below the 100-day average. Gas is down 3.2 percent this week and up 33 percent from a year ago.

The premium for February contracts versus March narrowed 0.2 cent to 2.3 cents. March gas traded 9.9 cents above the April contract, compared with 11.3 cents yesterday.

Options Trading

February $4.45 calls were the most active options in electronic trading. They slid 2.6 cents to 8.6 cents per million Btu on volume of 617 at 9:38 a.m. Calls accounted for 79 percent of trading volume.

The EIA, the Energy Department’s statistical arm, releases its stockpile report at 10:30 a.m. in Washington. Analyst estimates ranged from declines of 103 billion to 143 billion.

The wide range of estimates signals uncertainty about gas demand during a holiday week, Viswanath said. The market was closed on Jan. 1 for New Year’s Day.

Today’s report may show the first below-average drop in five weeks. Gas inventories declined at almost twice the normal pace in the first six weeks of the November-March heating season, dropping 763 billion cubic feet to 3.071 trillion as of Dec. 20, EIA data show. A stockpile deficit to the five-year average widened to a record 9.2 percent from a surplus of 1.5 percent at the start of November.

A fast-moving storm brought near-blizzard conditions to parts of the Northeast late yesterday and today.

Northeast Snow

Manhattan’s Central Park had received 6 inches (15 centimeters) of snow by 7 a.m., according to the National Weather Service. Boston’s Logan International Airport reported 14.6 inches, said Nicole Belk, a weather service meteorologist in Taunton, Massachusetts.

Intense cold in the central and eastern states over the next five days will fade by the middle of next week, according to MDA Weather Services in Gaithersburg, Maryland. Above-average temperatures from Texas through the Great Plains from Jan. 8 through Jan. 12 will spread across the East the following five days, MDA said.

The low temperature in New York City will be 5 degrees Fahrenheit (minus 15 Celsius), on Jan. 7 before climbing to 37 degrees, 10 higher than average, on Jan. 13, according to AccuWeather Inc. in State College, Pennsylvania.

About 49 percent of U.S. households use gas for heating with the biggest consumers in the Midwest, Energy Information Administration data show. The heating season 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: Dan Stets at dstets@bloomberg.net

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