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Natural Gas Rises to One-Month High on Colder Weather Outlook

Feb. 26 (Bloomberg) -- Natural gas futures advanced to the highest price in a month amid forecasts of below-normal temperatures that would increase heating-fuel consumption.

Gas gained 0.4 percent. MDA Weather Services in Gaithersburg, Maryland, predicted mostly colder-than-average weather in the eastern half of the U.S. from March 3 through March 7. The futures gained 3.7 percent to settle at $3.414 per million British thermal units yesterday, the highest closing price since Feb. 6.

“We’re seeing a little bit of follow-through from yesterday’s big run,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “In the short term, the cold weather coming in is giving the market a boost.”

Natural gas for March delivery rose 1.3 cents to settle at $3.427 per million British thermal units on the New York Mercantile Exchange, the highest closing price since Jan. 25. The futures are up 34 percent from a year ago. Trading volume was 22 percent below the 100-day average at 2:47 p.m.

The March gas contract expired today. The more actively traded April contract slid 1.4 cents to $3.456 per million Btu. April futures traded 2.9 cents above March, compared with 5.6 cents yesterday.

April $4 calls were the most active gas options in electronic trading. They fell 0.2 cent to 0.8 cent per million Btu on volume of 738 contracts as of 3:10 p.m. Calls accounted for 53 percent of options volume.

Colder Weather

“Today’s March contract expiration suggests a preoccupation with book squaring,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said in a note to clients.

The low in New York on March 3 may be 27 degrees Fahrenheit (minus 3 Celsius), 5 less than usual, according to AccuWeather Inc. in State College, Pennsylvania. The low in Chicago may be 23 degrees, 4 below 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.

The EIA’s weekly stockpile data, due Feb. 28 at 10:30 a.m. in Washington, may show supplies fell by 166 billion cubic feet in the week ended Feb. 22, according to the median of five analyst estimates compiled by Bloomberg. The five-year average change for the week is a decrease of 118 billion. Last year, inventories slid by 106 billion during the period.

Supplies totaled 2.4 trillion cubic feet in the week ended Feb. 15, 18 percent above the five-year average and 9.2 percent below levels a year earlier.

Production Record

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 Energy Information Administration 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 11 months of last year, on pace to be the highest annual level since 1991, EIA data show.

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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