Natural gas stockpiles declined at a record pace last week as furnaces ran non-stop to combat a blast of arctic weather, according to analyst forecasts compiled by Bloomberg.
U.S. inventories fell by 300 billion cubic feet to 2.517 trillion in the seven days ended Jan. 10, based on the median of 18 estimates. A decline that size would be the biggest in U.S. Energy Information Administration data going back to 1994, surpassing a drop of 285 billion in the week ended Dec. 13.
The lower 48 states had their coldest day of the 21st Century on Jan. 7, according to Commodity Weather Group LLC. Chicago’s low plunged to minus 11 degrees Fahrenheit (minus 24 Celsius), 29 below average, as Manhattan slipped to 4, 23 lower than usual, AccuWeather Inc. data show.
“We clearly have a tighter fundamental balance, given the very cold weather, and clearly that has given the support to prices,” said David Bouckhout, senior commodity strategist at Toronto-Dominion Bank in Calgary. “It has a ripple effect in the sense that tighter balances now will leave a bigger hole the ground to be filled this summer during the injection season.”
Estimated gas inventory declines ranged from 278 billion to 321 billion cubic feet. The five-year average drop for the period is 159 billion. Supplies slid by 156 billion the same time last year. The EIA, the statistical arm of the Energy Department, is scheduled to release its weekly stockpile report at 10:30 a.m. tomorrow in Washington.
Natural gas futures have rallied 26 percent since Nov. 1 as waves of freezing weather boosted heating demand. Gas for February delivery rose 4.4 cents, or 1 percent, to $4.413 per million British thermal units at 12:31 p.m. on the New York Mercantile Exchange.
Gas is being withdrawn from storage facilities at the fastest pace in 13 years, Jose Villar, an analyst with the EIA in Washington, said in an e-mail today. Supplies dropped 992 billion cubic feet between Oct. 31 and Jan. 3, the most since the record drop for the period of 1.078 trillion in the 2000-2001 heating season, he said. The five-year average decline is 621 billion.
Stockpiles in the week ended Jan. 3 were 10.1 percent below the five-year average for the period, the biggest weekly deficit in EIA data going back to 2005. Supplies were 15.8 percent below year-earlier levels.
The U.S. cut its end-of-March supply forecast by 200 billion cubic feet to 1.5 trillion following “a cold December and several large weekly withdrawals,” Adam Sieminski, administrator of the EIA, said in an e-mailed Statement on Jan. 7. Inventories typically bottom out in March, the end of the U.S. peak heating-demand season.
Government estimates would put inventory levels at the end of the first quarter at the lowest level since 2008, when supplies dropped to 1.248 trillion.
“There seems to be a lot of chatter” that a record drawdown in tomorrow’s inventory report followed by another frigid assault could push gas supplies to a low of 1.1 trillion or 1.2 trillion by the end of March, said Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania. The need for an aggressive stockpiling season starting this spring has compressed gas-price spreads through the summer, he said.
March gas futures are trading 21.5 percent above April, the smallest premium for this time the year since 2004, data compiled by Bloomberg show. The discount for April versus October narrowed to 3.3 cents today from 12.4 cents on Nov. 8, also the lowest level for this time of the year in a decade.
Boston’s low on Jan. 22 will drop to 11 degrees Fahrenheit (minus 11 Celsius), 11 below normal, while Minneapolis will slide to minus 4 on Jan. 27, 12 lower than average, said AccuWeather in State College, Pennsylvania. About 49 percent of U.S. households use gas for heating and 39 percent use electricity, EIA data show.
Low temperatures in Chicago will hover in the teens for most of this week, the National Weather Service said. A blizzard warning is in effect today across parts of North Dakota, South Dakota and Minnesota. Lows of zero degrees for Chicago and single-digit readings from Washington to Boston are possible by next week, said Matt Rogers, president of Commodity Weather in Bethesda, Maryland.
Temperatures are expected to average at least 3 degrees below normal from Minnesota to Alabama and across the East from Jan. 20 to 24, Rogers said. That would be followed by a more widespread and intense outbreak of cold weather through Jan. 29.
“This is an unbelievable to-date demand season” that will keep a floor in gas prices of around $3.90 or $4, Schork said. “In the near-term we could see spikes.”