Natural gas futures rose in New York by the most in more than five weeks on speculation that colder weather across the U.S. in early March will spur fuel use.
Gas climbed 3.8 percent, the biggest percentage gain since Jan. 11, as Commodity Weather Group LLC in Bethesda, Maryland, predicted below-normal temperatures for most of the lower 48 states from March 1 through March 5 after milder weather in the East next week. A gas surplus to the five-year average has widened since the end of November as mild weather crimped demand for the heating fuel.
“The weather is proving to be fairly cold so that’s showing a lot of demand,” said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami. “I wouldn’t look for any large rallies here because there’s plenty of inventory left in storage.”
Natural gas for March delivery gained 11.9 cents to $3.272 per million British thermal units on the New York Mercantile Exchange, settling higher for the first time in three days. Trading volume was 10 percent above the 100-day average at 2:41 p.m. Prices are down 2.4 percent this year.
March $3.30 calls were the most active gas options in electronic trading. They were up 2.3 cents to 3.9 cents per million Btu on volume of 1,055 contracts as of 2:56 p.m. Calls accounted for 52 percent of options volume.
A storm moving off the Pacific Ocean will probably bring heavy snow to the mountains around San Diego and Los Angeles before blanketing the Upper Midwest and Great Plains later this week, according to the National Weather Service.
Six to 12 inches (15 to 30 centimeters) of snow are possible in the mountains just north and east of Los Angeles. After the storm crosses the Rocky Mountains, it may drop as much as a foot of snow on the drought-parched Upper Midwest and central Great Plains.
About 50 percent of U.S. households use gas for heating, according to the Energy Information Administration.
“Possibly some of this rally is driven by short covering” after weather models turned colder heading into the first week of March, said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York.
Money managers reduced net-long positions on four U.S. gas contracts, or wagers on rising prices, by 7,754 futures equivalents, or 5.4 percent, to 136,403 during the week ended Feb. 12, according to the Feb. 15 Commodity Futures Trading Commission’s Commitments of Traders report. It was the first decline in the bullish bet in six weeks.
Gas inventories totaled 2.527 trillion cubic feet during the week ended Feb. 8, the EIA, the statistical arm of the Energy Department, said in report last week. A supply surplus to the five-year average has widened to 16 percent from 4.6 percent on Nov. 30.
A stockpile deficit to year-earlier levels increased to 9.7 percent from a surplus of 0.7 percent at the end December, EIA data show. Last winter was the fourth-warmest on record for the contiguous 48 states, reducing fuel demand from power plants and households.
Viswanath expects the next stockpile report, scheduled for release on Feb. 21, to show a below-average storage withdrawal of 124 billion cubic feet while Tim Evans, an energy analyst at Citi Futures Perspective in New York, is predicting a decline of 122 billion. The five-year average drop for the week ended Feb. 15 is 140 billion, EIA data show.
“That may not prove more than a temporary check on prices, given the more supportive temperatures and storage reports to follow,” Evans said in a note to clients today.
The EIA expects gas supplies to end the heating season in March at about 2 trillion cubic feet, below 2.477 trillion a year earlier but still above the five-year average of 1.726 trillion for that time of the year, according to the Feb. 12 Short-Term Energy Outlook.
U.S. marketed gas production will increase 1.1 percent to a record 70.02 billion cubic feet a day in 2013 from 69.24 billion as more of the fuel is extracted from shale deposits such as in Pennsylvania, the EIA said in the monthly report.
Exxon Mobil Corp., the world’s largest energy company by market value, said new shale projects in the U.S. and heavy-oil developments in Canada helped swell crude and natural gas reserves last year. Exxon returns to having more than half of its reserves in liquids instead of gas, the Irving, Texas-based company said in a statement today.
Exxon added reserves equivalent to 1.8 billion barrels in 2012 to 25.2 billion with liquids, such as crude oil, accounting for 51 percent. Gas’s share fell to 49 percent from 51 percent at the end of 2011, the company said.