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Natural Gas Futures Advance as Late Winter Cold Erodes Supplies

March 19 (Bloomberg) -- Natural gas rose in New York for the third time in four days on speculation that a report tomorrow will show that cold weather pushed U.S. inventories to an 11-year low.

Gas gained 0.6 percent as the government may say that stockpiles fell 59 billion cubic feet last week, pushing storage levels below 1 trillion cubic feet for the first time since 2003, based on the median of 19 analyst estimates compiled by Bloomberg. The five-year decline is 30 billion while supplies fell 74 billion the same week of 2013.

“We are going to slip below 1 tcf here in the next report,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “As the storage level is coming into focus that is putting a bid in the market.”

Natural gas for April delivery rose 2.8 cents to settle at $4.484 per million British thermal units on the New York Mercantile Exchange. Volume for all futures traded was 56 percent below the 100-day average at 2:36 p.m. Gas is up 6 percent this year.

A final cold outbreak will stretch from the Great Plains through the East Coast March 24 through March 28, according to Commodity Weather Group LLC in Bethesda, Maryland. Below-normal temperatures will linger in the Northeast and around the Great Lakes heading into April while the rest of the lower 48 states see seasonal or above-normal readings.

Chicago Weather

The high in Chicago on March 24 will be 35 degrees Fahrenheit (2 Celsius), 15 below normal, before climbing a week later to 64 degrees, 11 higher than average, AccuWeather Inc. said on its website.

About 49 percent of U.S. households use gas for heating, led by the Midwest, according to the U.S. Energy Information Administration, the statistical arm of the Energy Department. Demand for gas is highest during the heating season from November through March.

Milder weather is reducing the pace of gas withdrawals from storage facilities. Analyst estimates for last week’s decline ranged from 44 billion to 70 billion cubic feet. Inventory levels dropped 195 billion in the week ended March 7 to 1.001 trillion, widening a deficit to the five-year average to a record 46 percent, EIA data show.

Tomorrow’s report will be the fifth time this season that the weekly stock reduction lagged behind the year-earlier drop, and the current weather outlook indicates that withdrawals will probably continue to be smaller, Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York, said in a note to clients today.

“Nevertheless, the season-to-date destocking already sets the bar relatively high for the upcoming summer injection season,” she said. “So a ‘slackened’ pace for withdrawals is actually welcomed news.”

To contact the reporter on this story: Naureen S. Malik in New York at nmalik28@bloomberg.net

To contact the editors responsible for this story: Dan Stets at dstets@bloomberg.net Bill Banker, Charlotte Porter

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