Natural Gas Advances on Estimates of Above-Normal Inventory Drop

Natural gas futures climbed in New York for the first time in four days after analysts predicted government data would show a larger-than-usual withdrawal from inventories of the heating fuel for last week.

Gas rose as much as 1.5 percent before the Energy Department report, scheduled for release at 10:30 a.m. in Washington, which may show that stockpiles fell 191 billion cubic feet in the seven days ended Jan. 4, based on the median of 25 analyst estimates compiled by Bloomberg. The five-year average decline for the week is 121 billion, according to FirstEnergy Capital Corp. in Calgary.

“The storage report is the market’s focus at the moment,” said Tom Saal, senior vice president at FCStone Latin America LLC in Miami. “It was pretty cold last week and we could have some extreme price action after the data comes out.”

Natural gas for February delivery rose 2 cents, or 0.6 percent, to $3.133 per million British thermal units at 9:31 a.m. on the New York Mercantile Exchange. Trading volume was down 40 percent from the 100-day average. Prices are up 6.5 percent from a year ago.

Gas tumbled to $3.05 per million Btu on Jan. 2, the lowest intraday price since Sept. 26. The futures have dropped 18 percent from a one-year intraday high of $3.933 on Nov. 23.

Inventories totaled 3.517 trillion cubic feet in the week ended Dec. 28, the department said last week. Supplies were 12.4 percent above the five-year average for the seven-day period, up from a surplus of 4.6 percent at the end of November and down from 61 percent in March. Stockpiles rose to an all-time high of 3.929 trillion in the week ended Nov. 2.

Colder Weather

The weather may be colder than normal in the Northeast from Jan. 20 through Jan. 24, according to Commodity Weather Group LLC in Bethesda, Maryland.

The low in New York on Jan. 20 may be 16 degrees Fahrenheit (minus 7 Celsius), 11 lower than usual, according to AccuWeather Inc. in State College, Pennsylvania. The low in Boston may be 21 degrees, 1 below average.

About 50 percent of U.S. households use gas for heating, Energy Department data show.

The department increased its estimate for 2013 natural gas prices in a Jan. 8 report, citing more normal winter heating demand compared with last year. Gas at the benchmark Henry Hub in Erath, Louisiana, will average $3.74 per million Btu, up from the December estimate of $3.68, according to the monthly Short-Term Energy Outlook. Prices averaged $2.75 in 2012.

Gas Production

Natural gas output in the lower-48 states rose to an all-time high in October as more of the fuel was pumped from shale formations in the Northeast and North Dakota, the department said Jan. 7.

Gross gas production increased 0.4 percent to 73.54 billion cubic feet a day from a revised 73.22 billion in September, the department’s Energy Information Administration said in the monthly EIA-914 report.

Supplies from the “other states” category rose 1.8 percent to 23.94 billion cubic feet a day from a revised 23.51 billion in September. Production in that region advanced “as operators reported new wells coming online in the Marcellus and Bakken shale plays,” the department said.

The boom in oil and natural gas production helped the U.S. cut its reliance on imported fuel. America met 83 percent of its energy needs in the first nine months of last year, department data show. If the trend goes on through 2012, it will be the highest level of self-sufficiency since 1991.

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