Natural gas futures rebounded from a one-week low in New York on speculation that a government report may show a near-record U.S. inventory drop after cold weather boosted heating needs.
Gas gained as much as 2.2 percent before today’s Energy Information Administration report, which will probably show stockpiles fell by 263 billion cubic feet last week, based on the median of 26 analyst estimates compiled by Bloomberg. The record drop was 274 billion in January 2008. Lower temperatures earlier this month will return in the Midwest and Northeast for Dec. 24 through Jan. 2, said MDA Weather Services.
“There is no way you can look away from the fact that you are going to get a gigantic number; it’s going to be within striking distance of the all-time record,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “That’s going to lend significant support to the market.”
Natural gas for January delivery rose 8.5 cents, or 2 percent, to $4.336 per million British thermal units at 9:33 a.m. on the New York Mercantile Exchange after closing yesterday at $4.251, the lowest since Dec. 10. Trading volume was 9 percent above the 100-day average for the time of day. Gas is up 29 percent this year, the biggest gainer in the Standard & Poor’s GSCI gauge of 24 commodities.
The discount for January futures to February widened 0.9 cent to 3.2 cents. March gas traded 17.9 cents above the April contract, compared with 14.4 cents yesterday.
February $4.50 calls were the most active options in electronic trading. They were up 3.5 cents at 15.6 cents per million Btu on volume of 431 at 9:36 a.m. Calls accounted for 61 percent of trading volume.
The EIA, the statistical arm of the Energy Department, is scheduled to release its weekly gas inventory report at 10:30 a.m. in Washington.
Analyst estimates ranged from decreases of 220 billion cubic feet to 280 billion. Supplies dropped 70 billion in the same period last year and the five-year average for the week is a 133-billion decline.
U.S. inventories totaled 3.533 trillion cubic feet in the seven days ended Dec. 6, 7.2 percent below year-earlier levels and 3 percent below the five-year average, EIA data show.
Unusually cold weather that swept the eastern U.S. over the past two weeks will give way to unseasonably warm weather from the Northeast to Texas over the next five days, according to MDA in Gaithersburg, Maryland. Below-normal temperatures from Canada will then push in, with the strongest cold centered in the Midwest.
The high temperature in Manhattan’s Central Park will jump to 66 degrees Fahrenheit (19 Celsius), 25 above normal, before sliding two days later to 36 degrees, 4 lower than average, according to AccuWeather Inc. in State College, Pennsylvania. Chicago’s high will drop to 15, 18 below normal, on Dec. 23.
About 49 percent of U.S. households use gas for heating, says the EIA, the Energy Department’s statistical arm. The heating season from November through March is the peak-demand period for the fuel in the lower 48 states.
Gas today closed a key technical gap that was created after trading for Dec. 16 reached a high of $4.318, below the previous session’s low of $4.341, Yawger said. The market has a tendency to close gaps left like that, and in this case it creates a “technical acceleration point” to the upside, he said.