Natural Gas Climbs to Two-Week High on Forecasts of Cold Weather

Natural gas futures advanced to a two-week high in New York on forecasts of colder-than-normal weather that would spur demand for the heating fuel.

Gas climbed 1.4 percent after Commodity Weather Group LLC in Bethesda, Maryland, predicted below-average temperatures in the eastern half of the U.S. from Jan. 19 through Jan. 23. The low in New York on Jan. 22 may be 16 degrees Fahrenheit, 11 below normal, according to AccuWeather Inc. in State College, Pennsylvania.

“The cold weather is supposed to return and some of the sellers are bailing out,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The idea is that this kind of cold will bring stronger withdrawals from storage in the weeks to come.”

Natural gas for February delivery rose 4.6 to $3.373 per million British thermal units on the New York Mercantile Exchange, the highest settlement price since Dec. 28. Trading volume was up 8.3 percent from the 100-day average at 2:37 p.m. The futures have gained 26 percent from a year ago.

February $3.10 puts were the most active gas options in electronic trading. They were 1.1 cents lower at 1.2 cents on volume of 1,777 contracts as of 2:39 p.m. Puts accounted for 54 percent of options volume.

Net-long wagers on four U.S. natural gas contracts advanced by 4,371 futures equivalents, or 7.8 percent, to 60,421 in the week ended Jan. 8, according to data released Jan. 11 by the Commodity Futures Trading Commission. It was the first increase in six weeks.

Chicago Low

The low in Chicago on Jan. 22 may be 10 degrees Fahrenheit (minus 12 Celsius), 8 lower than normal, according to AccuWeather.

About 50 percent of U.S. households use gas for heating, according to the Energy Information Administration, the statistical arm of the Energy Department.

The number of rigs drilling for gas in the U.S. fell by 5 last week to 434, Baker Hughes Inc. in Houston said on Jan. 11. The total was down 45 percent from a year earlier.

An EIA report Jan. 10 said inventories fell 201 billion cubic feet in the seven days ended Jan. 4 to 3.316 trillion cubic feet, the biggest weekly decline since February 2011.

A surplus to the five-year average fell to 10.7 percent from 12.4 percent the previous week. Supplies were 2.6 percent below year-earlier inventories, the widest deficit since September 2011.

Price Outlook

The EIA increased its estimate for 2013 natural gas prices, citing more normal winter heating demand compared with last year. Gas prices at the benchmark Henry Hub in Erath, Louisiana, will average $3.74 per million British thermal units, compared with the previous estimate of $3.68 and $2.75 in 2012, the EIA said Jan. 8 in its monthly Short-Term Energy Outlook.

Consol Energy Inc., the third-largest U.S. coal miner by sales, plans to sell assets for $127 million to $312 million in 2013 as it ramps up production of natural gas.

Asset sales will help finance 2013 capital spending of $1.29 billion to $1.5 billion, most of it on gas production, Consol, based in Canonsburg, Pennsylvania, said today in a statement. Gas output will rise as much as 15 percent above last year’s production, equivalent to 156.3 billion cubic feet.

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 administration said Jan. 7.

Production Report

Gross gas production increased 0.4 percent to 73.54 billion cubic feet a day from a revised 73.22 billion in September, the agency 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 “as operators reported new wells coming online in the Marcellus and Bakken shale plays,” the EIA 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, government data show. If the trend goes on through 2012, it will be the highest level of self-sufficiency since 1991.

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