Natural gas gained for a fifth day in New York to the highest level in six weeks on expectations that a blast of arctic air across the U.S. will spur demand.
Gas rose 0.8 percent as forecasters including MDA Weather Services in Gaithersburg, Maryland, predicted below-normal temperatures this week in the U.S. East. Seasonal or higher readings during the first five days of December will give way to another shot of cold. A government report tomorrow may show a smaller inventory drop than the previous week, analyst estimates compiled by Bloomberg show.
“Right now we are set to outpace the 10-year normal weather for the next two weeks,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “So it appears that the moderation in the weather reports and week-over-week decline in last week’s inventory draw are being faded in favor of the potential record-breaking storage report expected out next week.”
Natural gas for December delivery rose 2.9 cents to $3.818 per million British thermal units on the New York Mercantile Exchange, the highest settlement price since Oct. 14. Trading volume was even with the 100-day average at 2:48 p.m. Gas has gained 14 percent this year.
December futures expired today. The January contract gained 2.2 cents to $3.864. The discount of December to January narrowed 0.7 cent to 4.6 cents.
January $3.45 puts were the most active options in electronic trading. They were 0.4 cent lower at 1.8 cents per million Btu on volume of 687 at 3:39 p.m. Puts accounted for 44 percent of trading volume.
Temperatures across the eastern U.S. are expected to be seasonal from Dec. 1 to Dec. 5, while arctic air is forecast to grip the western part of the country from Dec. 6 to Dec. 10, according to Matt Rogers, president of Commodity Weather Group LLC in Bethesda, Maryland.
The low temperature in Chicago on Dec. 6 may be 17 degrees Fahrenheit (minus 8 Celsius), 9 below normal, according to AccuWeather Inc. in State College, Pennsylvania. About 49 percent of U.S. households use gas for heating and 39 percent rely on electricity, according to the Energy Information Administration, the Energy Department’s statistical arm. The heating season runs November through March.
Gas inventories probably declined by 13 billion cubic feet last week, based on the median of 13 analyst estimates compiled by Bloomberg. Estimates ranged from declines of 1 billion to 21 billion. Supplies fell by 2 billion cubic feet the same time last year while the five-year average drop for the seven days is 15 billion, EIA data show.
The EIA is scheduled to release its weekly gas inventory report tomorrow, a day early because the government will be closed on Nov. 28 for the Thanksgiving holiday.
Stockpiles fell by 45 billion cubic feet in the week ended Nov. 15 to 3.789 trillion in the first decline of the heating season, EIA data show. A surplus to the five-year average narrowed to 0.4 percent from 1.5 percent the previous week, the least since a deficit of 1.2 percent on July 26.
Given the surge of cold weather in the eastern U.S. this week, the withdrawal rate may approach record levels for this time of the year in next week’s inventory report, Viswanath said. Early estimates circulating the market indicate the report may show a drop of 140 billion, which would be just short of the record set on Nov. 24, 2000, of a 148-billion-cubic-foot decline, she said.
Gas production will climb for the sixth consecutive year as new wells are connected at the Marcellus shale in the Northeast, according to the EIA. Marketed gas output will gain 1.6 percent this year to a record 70.29 billion cubic feet a day, the government said in its Nov. 13 Short-Term Energy Outlook.
The U.S. met 86 percent of its own energy needs in the first eight months of 2013, on pace to be the highest annual rate since 1986, EIA data show.