Natural Gas Futures Head for Weekly Gain on Cold Weather Outlook

Natural gas advanced in New York, heading for the first weekly gain since November, as forecasters predicted below-normal temperatures that would increase heating demand.

Gas climbed as much as 1.2 percent after Commodity Weather Group LLC in Bethesda, Maryland, said colder-than-average weather may spread across most of the contiguous U.S. from Dec. 26 through Jan. 4. The low in Chicago on Jan. 2 may be 8 degrees Fahrenheit (minus 13 Celsius), 11 lower than usual, according to AccuWeather Inc.

“The winter weather’s making a little bit of a comeback and prices are responding,” said Tom Saal, senior vice president of energy trading at INTL Hencorp Futures LLC in Miami. “The market is going to be grinding higher again for as long as these forecasts continue.”

Natural gas for January delivery rose 1.7 cents, or 0.5 percent, to $3.479 per million British thermal units at 9:37 a.m. on the New York Mercantile Exchange. The futures are up 16 percent this year, heading for the first annual gain since 2007. Prices have gained 4.9 percent this week, approaching the first weekly increase since Nov. 23.

Gas declined to $3.261 per million Btu in intraday trading on Dec. 14, the lowest level since Sept. 28.

The low in Cleveland on Jan. 2 may be 12 degrees, 12 lower than normal, according to AccuWeather. About 50 percent of U.S. households use gas for heating, Energy Department data show.

Inventory Drop

An Energy Department report yesterday showed inventories dropped 82 billion cubic feet in the week ended Dec. 14 to 3.724 trillion. Analyst estimates compiled by Bloomberg forecast a withdrawal of 75 billion.

The stockpile decrease was smaller than the five-year average decline for the week of 144 billion cubic feet, department data show. Supplies 10.2 percent above the five-year average, compared with 8 percent for the previous period.

The gas inventory surplus to the average has slipped from a six-year high of 61 percent in March, department data show.

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

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.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE