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Natural Gas Jumps to Two-Week High on Forecasts of March Cold

Feb. 25 (Bloomberg) -- Natural gas futures jumped to the highest price in more than two weeks on forecasts of cold weather that would stoke demand for the heating fuel. March gas options on the New York Mercantile Exchange expired today.

Gas gained 3.7 percent, climbing for a second day. Commodity Weather Group LLC in Bethesda, Maryland, said temperatures may be below normal in most of the central and eastern U.S. from March 2 through March 11. The low in Chicago on March 7 may be 16 degrees Fahrenheit (minus 9 Celsius), 12 less than usual, according to AccuWeather Inc.

“We’re seeing some cold here at the end of the season and the options expiration is giving us a little bit of a boost,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “It looks like the outlook for two-and-a-half weeks of cold might have caught the market a little short.”

Natural gas for March delivery rose 12.3 cents to settle at $3.414 per million British thermal units on the Nymex, the highest closing price since Feb. 6. The futures are up 34 percent from a year ago. Trading volume was 0.8 percent above 100-day average at 2:59 p.m.

March $3.35 puts were the most active gas options in electronic trading. They fell 6.7 cents to 0.1 cent per million Btu on volume of 1,011 contracts as of 3:15 p.m. Puts accounted for 52 percent of options volume.

The April contract traded 5.6 cents above March futures, compared with 5.8 cents on Feb. 22.

Below Normal

The low in Cleveland on March 7 may be 20 degrees, 9 less than usual, according to AccuWeather in State College, Pennsylvania.

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.

A storm moving east today will threaten the Midwest with snow tomorrow, according to AccuWeather. National Weather Service blizzard warnings stretch from eastern New Mexico through the Texas Panhandle into Oklahoma and Kansas. Winter storm warnings and advisories reach across Missouri, Arkansas and Illinois into Wisconsin, Michigan, Indiana and Ohio.

“Snow and blowing snow will reduce visibility to zero at times, producing white-out conditions in many spots,” the National Weather Service said. “Roads will be snow-packed and icy. Snow drifts 5 feet or higher in some areas will make driving impossible.”

Gas Stockpiles

Gas inventories fell by more than forecast in the week ended Feb. 15, an EIA report released Feb. 21 showed. Stockpiles dropped by 127 billion cubic feet to 2.4 trillion. Analyst estimates compiled by Bloomberg showed a withdrawal of 124 billion.

A surplus to the five-year average rose to 18 percent from 16 percent the previous week, the report showed. Supplies were 9.2 percent below year-earlier levels, compared with 9.7 percent a week earlier.

Marketed gas production will average a record 70.02 billion cubic feet a day this year, up 1.1 percent from 2012, as output from the Marcellus shale formation in the Northeast grows, the EIA said in its monthly Short-Term Energy Outlook, released Feb. 12 in Washington.

Gas prices at the benchmark Henry Hub in Erath, Louisiana, will average $3.53 per million British thermal units in 2013, compared with $2.75 per million Btu last year, the agency said.

Stockpiles of the fuel may total about 2 trillion cubic feet at the end of March, down from 2.477 trillion at the same time last year, according to the report.

The boom in oil and natural gas production helped the U.S. cut its reliance on imported fuel. America met 84 percent of its energy needs in the first 10 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.

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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