Natural gas rose to a 20-month high in New York after a government report showed that U.S. stockpiles fell more than expected last week.
The futures advanced 1.3 percent after the Energy Information Administration said supplies in the week ended April 5 dropped 14 billion cubic feet to 1.673 trillion. Analyst estimates compiled by Bloomberg predicted a drop of 13 billion. The five-year average change for the week is an increase of 15 billion.
“It’s a confirmation that there’s tightness in the supply-and-demand picture,” said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami. “It’s a bullish withdrawal in a period when we almost never see a withdrawal.”
Natural gas for May delivery gained 5.4 cents to $4.139 per million British thermal units on the New York Mercantile Exchange, the highest settlement price since Aug. 2, 2011. Trading volume was 90 percent higher than the 100-day average at 2:57 p.m.
Inventories were 3.8 percent below the five-year average in the week ended April 5, compared with 2.1 percent a week earlier. A deficit to year-earlier levels widened to 32.46 percent from 31.59 percent a week earlier, a record in EIA data going back to 2005. Supplies will reach a peak of 3.793 trillion cubic feet by the end of October, down 137 billion from a year earlier, the EIA said April 9.
The heating and power-plant fuel has increased 24 percent this year as cold weather increased demand, prompting analysts to boost price forecasts. Goldman Sachs Group Inc. raised its 2013 outlook by 17 percent to an average of $4.40 per million Btu on April 4. Morgan Stanley increased its prediction to $3.93 on April 8 from a March estimate of $3.66.
The EIA lifted its price projection on April 9 to $3.52 per million Btu from $3.41 and cut its assessment of 2013 U.S. production by 0.4 percent. Output will average a record 69.33 billion cubic feet a day this year, down from the March estimate of 69.6 billion, the EIA said.
The discount of May contracts to October, a measure of summer demand expectations, widened 0.8 cent to 10.2 cents per million Btu. The premium of March 2014 futures to April 2014, a gauge of supply expectations at the end of next winter, widened by 3.56 cents to 35.7 cents.
May $4 puts were the most-actively traded options as of 3:02 p.m., declining 2.1 cents to 4.1 cents per million Btu on volume of 1,599 lots. Puts accounted for 56 percent of options volume. Implied volatility for at-the-money gas options expiring in May was 30.63 percent at 2:45 p.m., up from 30.21 percent yesterday.
Hedge funds and other large speculators have increased bullish bets to a record as prices advanced. Money managers raised net-long positions, or wagers on rising gas prices, for a seventh consecutive week to 393,885 futures equivalents in the seven days ended April 2, according to the Commodity Futures Trading Commission’s April 5 Commitments of Traders report. It was the highest level in records dating back to January 2010.
In March, 1,446 low-temperature and 1,923 snowfall daily records were tied or broken across the U.S., according to the National Climatic Data Center in Asheville, North Carolina.
Typically, inventories decline from October through March as heating demand surges. Producers begin building supplies for the following winter starting in April.
“This is perceived as the last withdrawal of this extended winter season,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “We’re entering a period of spring-like, mild conditions, and without that weather support you might encounter some weakness.”
Lower-than-normal temperatures will boost heating demand in the Midwest through next week, according to a daily forecast from Commodity Weather Group LLC in Bethesda, Maryland. Temperatures in Chicago will drop to 30 degrees Fahrenheit (minus 1 Celsius) on April 19, 13 degrees below average, according to AccuWeather Inc. in State College, Pennsylvania. Dallas will fall to 45 degrees, 12 degrees below normal.
Higher prices have prompted electricity producers to curb gas consumption in favor of coal. Power plant demand dropped 16 percent in March from a year earlier, the EIA said today.
The boom in oil and natural gas production helped the U.S. cut its reliance on imported fuel. The U.S. produced 84 percent of its own energy in 2012, the most since 1991, EIA data show. The measure of self-sufficiency rose to 88 percent in December, the highest since February 1987.