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Natural Gas Futures Advance on Outlook for Cooler Weather

Dec. 17 (Bloomberg) -- Natural gas futures climbed in New York for the first time in eight days as revised forecasts showed below-normal temperatures that would spur heating demand.

Gas gained 1.3 percent after Commodity Weather Group LLC in Bethesda, Maryland, predicted colder-than-usual weather across most of the lower 48 states from Dec. 27 through Dec. 31. Earlier outlooks forecast above-average temperatures on the East Coast. Prices settled at an 11-week low of $3.314 per million British thermal units on Dec. 14.

“The colder-than-normal temperatures are giving us a little bit of a short-term bounce,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “The market had been looking oversold after last week’s declines.”

Natural gas for January delivery rose 4.4 cents to settle at $3.358 per million British thermal units on the New York Mercantile Exchange. The futures are up 12 percent this year, heading for the first annual gain since 2007.

February $3.75 calls were the most active gas options in electronic trading. They were 0.7 cent higher at 6.2 cents on volume of 503 contracts as of 3:05 p.m. Calls accounted for 61 percent of options volume.

Net-long bets on four U.S. natural gas contracts shrank by 18,460 futures equivalents, or 17 percent, to 92,119 in the week ended Dec. 11, according to data released Dec. 14 by the Commodity Futures Trading Commission.

Contract Index

The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and the ICE Futures U.S. Henry Hub contract. Henry Hub, in Erath, Louisiana, is the delivery point for Nymex futures, a benchmark price for the fuel.

The low in St. Louis on Dec. 30 may be 22 degrees Fahrenheit (minus 6 Celsius), 1 below the usual reading, according to AccuWeather Inc. in State College, Pennsylvania. The low in Cleveland may be 21 degrees, 4 lower than normal.

About 50 percent of U.S. households use gas for heating, Energy Department data show.

Gas inventories rose 2 billion cubic feet in the week ended Dec. 7 to 3.806 trillion cubic feet, the Energy Department reported Dec. 13. It was the latest seasonal supply gain since the week ended Dec. 30, 2005, according to department data compiled by Bloomberg.

Supplies were 8 percent above the five-year average, compared with 4.6 percent the previous week. The gas inventory surplus to the average has declined from a six-year high of 61 percent in March, department data show.

Total Purchases

Total SA has agreed to purchase liquefied natural gas from Cheniere Energy Partners LP’s Sabine Pass facility in Louisiana under a 20-year agreement.

Total’s North American subsidiary will buy about 2 million metric tons a year of the 4.5 million metric tons of capacity from Train Five at the proposed export facility, Cheniere said in a statement today. Deliveries from Train Five are expected to begin as soon as 2018.

The U.S. raised its forecast for natural gas output in 2012 by 0.6 percent in a report Dec. 11 and boosted its outlook for prices.

Marketed gas production will average 69.22 billion cubic feet a day this year, up from 68.84 billion estimated in November, the Energy Department said in its monthly Short-Term Energy Outlook. Output may rise 0.5 percent in 2013 to 69.59 billion a day, department estimates show.

Henry Hub

Gas prices at the benchmark Henry Hub in Erath, Louisiana, will average $2.78 per million British thermal units, compared with the previous estimate of $2.77, according to the report from the department’s Energy Information Administration.

The boom in oil and natural gas production helped the U.S. cut its reliance on imported fuel. America met 83 percent of its energy needs in the first eight months of the year, department data show. If the trend goes on through 2012, it will be the highest level of self-sufficiency since 1991.

The number of rigs drilling for gas in the U.S. slipped by one to 416 last week, according to data from Baker Hughes Inc. in Houston. The rig count is down 49 percent this year.

Gas futures volume in electronic trading on the Nymex was 306,485 as of 2:39 p.m., compared with the three-month average of 362,000. Volume was 391,969 on Dec. 14. Open interest was 1.16 million contracts. The three-month average is also 1.16 million.

The exchange has a one-business-day delay in reporting full volume and open interest data.

-- With assistance from Asjylyn Loder and Tina Davis in New York. Editors: Charlotte Porter, Richard Stubbe

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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