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Natural Gas Rises as Cold Spell Boosts Demand for Heating Fuels

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Dec. 26 (Bloomberg) -- Natural gas futures gained in New York for the first time in three days as freezing weather spurred demand for heating fuels.

Gas rose 1.4 percent as Commodity Weather Group LLC in Bethesda, Maryland, predicted below-normal temperatures from the Northeast into the Midwest in the next six to 10 days. About 50 percent of U.S. households use gas for heating. January options expired today and the futures will expire tomorrow.

“The forecasts for the coming week are providing a little bit of support for next week across the eastern half of the country,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Without strong heating demand, the market is going to have trouble sustaining any rallies.”

Natural gas for January delivery rose 4.6 cents to settle at $3.392 per million British thermal units on the New York Mercantile Exchange. Gas has climbed 13 percent this year, heading for the first annual gain since 2007. Futures trading volume was 55 percent below the 100-day average.

January $3.35 puts were the most active options in electronic trading on the Nymex. They fell 2.9 cents to 0.1 cent on volume of 1,250 lots at 2:18 p.m.

Winter Storm

A powerful winter storm that spawned tornadoes from Texas to Alabama, killing at least three people and leaving thousands without power, is bringing heavy snow to the Midwest and threatening rain and high wind in the East, according to the National Weather Service. Winter storm warnings are in effect from Illinois to Maine, the service said.

The low temperature in Chicago tomorrow will be 28 degrees Fahrenheit (minus 2 Celsius), 8 above the usual reading, before dropping to 2 below normal at 17 degrees on Dec. 31, according to AccuWeather Inc. in State College, Pennsylvania. New York City’s low may be 1 above normal tomorrow at 30 degrees before dropping to 22 degrees, 6 below average.

“The colder temperatures that are on the way will not only increase heating demand but also power demand, and to an extent industrial demand because they have to heat their facilities,” Aaron Calder, senior market analyst at Gelber & Associates in Houston, said in a note to clients today. Outages at nuclear power plants are about 8,000 megawatts above normal, he said.

Nuclear generation in the lower 48 states gained 0.2 percent from yesterday to 90,411 megawatts, or 89 percent of capacity, according to U.S. Nuclear Regulatory Commission data compiled by Bloomberg. Output was 5 percent lower than a ago with 11 of 104 reactors offline.

Nuclear Plants

Shut reactors may increase consumption of natural gas and coal to generate electricity. Power plants account for 36 percent gas demand in the nation, according to the Energy Department.

U.S. gas stockpiles may have declined by 84 billion cubic feet last week, based on the median of three analyst estimates compiled by Bloomberg. The five-year average drop for the period is 140 billion, department data show.

Inventories totaled 3.724 trillion cubic feet in the week ended Dec. 14, 10 percent above the historical average for the week, the department said last week. The supply surplus has widened since dropping to 4.5 percent four weeks earlier.

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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