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Natural Gas Pares Biggest Weekly Gain in Month on Milder Weather

March 28 (Bloomberg) -- Natural gas pared the biggest weekly increase in more than a month as forecasts for warmer weather at the start of April signaled reduced fuel demand.

Gas futures slid 1.2 percent in New York as MDA Weather Services said below-normal temperatures will be limited to the Northeast from April 7 through April 11, after earlier forecasts showed the cold sweeping across the East Coast. Prices yesterday jumped the most in five weeks following a government report that showed an above-average stockpile decline.

“It appears the market is rethinking yesterday’s rally,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “The expectation is that we are going to have a very strong production surge into the injection season to keep a lid on prices.”

Natural gas for May delivery fell 5.3 cents to settle at $4.485 per million British thermal units on the New York Mercantile Exchange. Volume for all futures traded was 59 percent below the 100-day average at 3:04 p.m. Prices gained 4 percent this week, the biggest increase since the week ended Feb. 21. Gas has risen 6 percent this year.

The high temperature in New York City on April 4 will climb to 61 degrees Fahrenheit (16 Celsius), 4 above normal, AccuWeather Inc. said on its website.

About 49 percent of U.S. households use gas for heating from November through March, according to the U.S. Energy Information Administration. Demand for the fuel slumps after the peak heating season before hotter weather spurs consumption by power plants to run air conditioners.

Gas Stockpiles

Blasts of polar air this winter spurred a record pace of fuel withdrawals from storage, depleting stockpiles to the lowest level in 11 years.

The EIA yesterday said inventories fell by 57 billion cubic feet in the week ended March 21 to 896 billion, more than the five-year average decline of 7 billion for the period. Supply deficits widened to a record 51 percent versus the five-year norm and 50 percent versus year-earlier levels.

Stockpiles will probably end March at 826 billion cubic feet, Dominick Chirichella, senior partner at the Energy Management Institute in New York, said in a note to clients today. Viswanath projects 810 billion.

A record amount of gas, about 3 trillion cubic feet, will need to be injected into storage from April through October, before the next heating season, Chirichella said. “The industry is likely to have a huge challenge in getting back to a comfortable pre-winter inventory level.”

Production Outlook

Marketed gas production this year will climb by an average 1.78 billion cubic feet a day, or 2.5 percent, to 71.96 billion, the EIA said in its March 11 Short-Term Energy Outlook. Gains are being driven by new wells at shale deposits such as the Marcellus in the Northeast.

The U.S. met 87 percent of its energy needs in 2013, the most since 1985, according to EIA data.

The Obama administration said it will propose rules to cut methane emissions at landfills and coal mines as well as begin a study that may result in regulations to reduce leaks from oil and gas production.

A 15-page plan released today outlines steps to help utilities curb leaks in transport and distribution of natural gas. The plan calls for the Environmental Protection Agency to study methane emissions from oil and gas production to determine whether rules are needed. If it decides to regulate, the standards would take effect in 2016.

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, Margot Habiby

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