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Canadian Natural Gas Advances as U.S. Fuel Supplies May Decline

March 18 (Bloomberg) -- Canadian natural gas rose amid speculation that the need for gas-fired generators in Japan could lead to lower supplies of the fuel in the U.S., and as the number of rigs exploring for the fuel dropped for a third straight week.

Nine of 16 analysts in a Bloomberg survey predicted New York gas futures will rise next week as cargoes of liquefied natural gas may be diverted to Japan after the country’s worst earthquake on record and a subsequent tsunami damaged nuclear power generators.

“One could expect prospective U.S. nuclear plant development will now be delayed and replaced by natural gas co-generation plants,” Chris Damas, a Barrie, Ontario-based analyst with BCMI Research, said in an e-mail. “There is a whole speculative trade that the demise of nuclear power development spells a renaissance for fossil fuels.”

U.S. gas drilling rig utilization slid to the lowest level in more than 13 months amid slumping prices as explorers focused on oil. The number of gas rigs in the U.S. fell by seven to 875 this week, according to Baker Hughes Inc.

Gas at the Alliance Pipeline delivery point near Chicago gained 6.24 cents to $3.9884 per million British thermal units on the Intercontinental Exchange. Alliance is an express line that can carry about 1.5 billion cubic feet a day to the Midwest from western Canada.

Idaho Border

At the Kingsgate point on the border of Idaho and British Columbia, gas was up 5.24 cents to $3.8631 per million Btu, according to ICE. At Malin, Oregon, where Canadian gas is traded for California markets, gas jumped 10.11 cents, or 2.6 percent, to $3.9681.

Alberta gas for April rose 1.75 cents to C$3.54 per gigajoule ($3.41 per million British thermal units) as of 3:55 p.m. New York time, according to NGX, a Canadian Internet market. Gas traded on the exchange is shipped to users in Canada and the U.S. Northeast, Midwest and West Coast and is priced on TransCanada’s Alberta system.

Natural gas for April delivery on the New York Mercantile Exchange rose 1 cent to $4.168 per million Btu.

Volume on TransCanada Corp.’s Alberta system, which collects the output of most of the nation’s gas wells, was 16.2 billion cubic feet as of 3 p.m. in New York, about 173 million below target.

Flow Rates

Gas was flowing at a daily rate of 3.74 billion cubic feet at Empress, Alberta, where the fuel is transferred to TransCanada’s main line.

At McNeil, Saskatchewan, where gas is transferred to the Northern Border Pipeline for shipment to the Chicago area, the daily flow rate was 1.63 billion cubic feet.

Available capacity on TransCanada’s British Columbia system at Kingsgate was 1.31 billion cubic feet. The system was forecast to carry 1.59 billion cubic feet today, about 55 percent of its capacity of 2.9 billion.

The volume on Spectra Energy’s British Columbia system, which gathers the fuel in northeastern British Columbia for delivery to Vancouver and the Pacific Northwest, totaled 2.79 billion cubic feet at 3:20 p.m.

To contact the reporter on this story: Gene Laverty in Calgary at glaverty@bloomberg.net.

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

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