Natural Gas Drops First Time in Five Days on Inventory

Natural gas futures slipped in New York for the first time in five days before a government report tomorrow that may show a below-average inventory decline.

Gas fell 0.6 percent as U.S. stockpiles may have decreased by 137 billion cubic feet last week, based on the median of 18 analyst estimates compiled by Bloomberg. The five-year average drop for the week is 144 billion, government data show. Above-normal eastern U.S. temperatures this week will give way to widespread cold, according to MDA Weather Services.

“We are not pulling a significant amount of gas from storage on a sustained basis,” said Tom Saal, senior vice president of energy trading at FCStone Latin America, LLC in Miami. “We are probably going to get some colder weather but it could be too little, too late. There’s plenty of gas in inventory.”

Natural gas for February delivery fell 2 cents to settle at $3.435 per million British thermal units on the New York Mercantile Exchange. Prices yesterday closed at $3.455, the highest settlement since Dec. 28. Trading volume was 4.6 percent above the 100-day average. Gas has climbed 29 percent from a year ago.

Futures tumbled to $3.05 per million Btu on Jan. 2, the lowest intraday price since Sept. 26. Prices are down 13 percent from a one-year intraday high of $3.933 on Nov. 23.

February $3.40 puts were the most active gas options in electronic trading. They were 0.2 cent lower at 6.5 cents on volume of 2,221 contracts as of 4:09 p.m. Puts accounted for 53 percent of options volume.

Gas for March delivery traded 0.2 cent above the February contract.

Gas Surplus

The weekly stockpile report from the Energy Information Administration, an arm of the Energy Department, is due at 10:30 a.m. in Washington. Last week’s report showed that 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.

The low in New York on Jan. 19 may be 34 degrees Fahrenheit (1 Celsius), 7 higher than usual, according to AccuWeather Inc. in State College, Pennsylvania. The low in Cleveland may be 27 degrees, 4 above normal.

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

Warmest Year

Last year was the warmest in records going back to 1895 for the 48 contiguous U.S. states and the second-worst for weather extremes including drought, hurricanes and wildfires, according to the National Oceanic and Atmospheric Administration.

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 EIA 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 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 advanced “as operators reported new wells coming online in the Marcellus and Bakken shale plays,” the agency said.

Production Record

Output rose to an all-time high of 28.5 trillion cubic feet in 2011, led by record yields from shale deposits, the EIA said in a separate report Jan. 7. Shale accounted for 30 percent of total production in 2011, up from 22 percent the previous year.

U.S. marketed gas production in 2013 will average a record 69.84 billion cubic feet a day, up 0.4 percent from 69.59 billion estimated in December, the administration said Jan. 8 in its monthly Short-Term Energy Outlook. Supplies may climb 0.9 percent from last year, 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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