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Natural Gas Futures Advance on Outlook for Frigid U.S. Weather

Natural gas futures climbed in New York for the first time in three days on forecasts of below-normal temperatures in early February that would boost demand for the heating fuel.

Gas gained as much as 1.1 percent after Commodity Weather Group LLC in Bethesda, Maryland, predicted a return to colder-than-usual weather in the eastern and northern U.S. from Feb. 3 through Feb. 7 after milder readings next week. Gas rose to $3.645 per million British thermal units on Jan. 22, the highest price since Dec. 7.

“There’s no doubt the colder temperatures are pushing the market higher,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “Depending on how the weather pans out, we may target the $3.75 area.”

Natural gas for February delivery rose 1.1 cents, or 0.3 percent, to $3.565 per million British thermal units at 9:29 a.m. on the New York Mercantile Exchange. Trading volume was 15 percent below the 100-day average. The futures have gained 40 percent from a year ago.

The low in New York on Feb. 4 may be 26 degrees Fahrenheit (minus 3 Celsius), 2 less than usual, according to AccuWeather Inc. in State College, Pennsylvania. The low in Chicago may be 9 degrees, 10 lower than normal.

About 50 percent of U.S. households use gas for heating, data from the Energy Information Administration show. The agency is part of the Energy Department.

Stockpile Report

An EIA report due today may show that stockpiles fell 175 billion cubic feet in the week ended Jan. 17 to 2.993 trillion, according to the median of 22 analyst estimates compiled by Bloomberg. The five-year average drop for the period is 176 billion.

The weekly gas storage report is scheduled for release at 10:30 a.m. in Washington.

The EIA said last week that inventories fell 148 billion cubic feet in the seven days ended Jan. 11. The five-year average decline was 144 billion for the period. Supplies were 4.4 percent below year-earlier levels.

The U.S. increased its estimate for 2013 natural gas prices, citing more normal winter heating demand compared with last year. Gas prices at the benchmark Henry Hub in Erath, Louisiana, will average $3.74 per million Btu, up from $2.75 in 2012, the EIA said Jan. 8 in its monthly Short-Term Energy Outlook.

Natural gas output in the lower-48 states rose to an all-time high in October as more of the fuel was pumped from shale formations in the Northeast and North Dakota, the administration said Jan. 7.

Production Record

Gross gas production increased 0.4 percent to 73.54 billion cubic feet a day from a revised 73.22 billion in September, the agency said in the monthly EIA-914 report.

Supplies from the “other states” category rose 1.8 percent to 23.94 billion cubic feet a day from a revised 23.51 billion in September. Production in that region advanced “as operators reported new wells coming online in the Marcellus and Bakken shale plays,” the EIA said.

The number of rigs drilling for gas in the U.S. fell by 5 last week to 429, Baker Hughes Inc. in Houston said Jan. 18. The total was down 46 percent from a year earlier.

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 nine months of last year, government data show. If the trend goes on through 2012, it will be the highest level of self-sufficiency since 1991.

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