Natural Gas Futures Climb on Forecasts of Colder Midwest Weather

Natural gas futures rose in New York for the third time in four days on forecasts of below-normal temperatures in the central U.S. that would increase demand for the heating fuel.

Gas gained 0.4 percent, the only energy commodity to advance in floor trading today, as a government outlook showed colder-than-normal weather in most of the lower 48 states from Feb. 14 through Feb. 18. Prices rebounded after failing to drop below $3.25 per million British thermal units, a key technical level, according to Gelber & Associates.

“There’s a cold snap looming in the second half of the month and that’s supportive of prices,” said Aaron Calder, an analyst at Gelber, an energy consulting firm in Houston. “The market looks pretty comfortable between $3.25 and $3.40.”

Natural gas for February delivery rose 1.4 cents to settle at $3.315 per million Btu on the New York Mercantile Exchange. Trading volume was 40 percent below the 100-day average for the time of day. The futures have gained 33 percent from a year ago.

March $3.70 calls were the most active gas options in electronic trading. They were 0.2 cent lower at 1.2 cents on volume of 1,061 contracts as of 2:36 p.m. Calls accounted for 67 percent of options volume.

Gas for April delivery traded 5.4 cents above March futures, compared with 5.2 cents on Feb. 1.

Money managers raised net-long wagers on four U.S. natural gas contracts advanced by 6,777 futures equivalents, or 5.7 percent, to 126,798 in the week ended Jan. 29, according to Commodity Futures Trading Commission data released Feb. 1. It was the highest level since the week ended Nov. 27.

Adjusted Contracts

The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and the ICE Futures U.S. Henry Hub contract. Henry Hub, in Erath, Louisiana, is the delivery point for Nymex futures, a benchmark price for the fuel.

The weather may be colder than normal in the contiguous 48 states from Feb. 14 through Feb. 18, a midday update to the National Weather Service’s Global Forecast System weather model showed.

The low in Minneapolis on Feb. 17 may be 3 degrees Fahrenheit (minus 16 Celsius), 11 below normal, according to AccuWeather Inc. in State College, Pennsylvania. The low in Chicago may be 21 degrees Fahrenheit, 1 below the usual reading.

About 50 percent of U.S. households use gas for heating, data from the Energy Information Administration show. The agency is part of the Energy Department.

Gas Stockpiles

Gas inventories totaled 2.802 trillion cubic feet in the week ended Jan. 25, 6.7 percent below last year’s stockpiles for the period. The supply surplus to the five-year norm has climbed to 12 percent from 11 percent over the past two weeks.

“It’s going to take a lot of cold weather to really get this market moving,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.

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.

Natural gas production in the lower-48 states rose to a record in November as more of the fuel was pumped from shale wells in the Northeast.

Output increased 0.6 percent to 73.88 billion cubic feet a day from a revised 73.47 billion in October, the Energy Department’s Energy Information Administration said in the monthly EIA-914 report released Jan. 31 in Washington.

New Wells

Supplies from the “other states” category rose 1.4 percent to 24.29 billion cubic feet a day from a revised 23.96 billion in October. Production advanced as “some operators reported new wells coming online in the Marcellus shale play,” the EIA said in the report.

The boom in oil and natural gas production helped the U.S. cut its reliance on imported fuel. America met 84 percent of its energy needs in the first 10 months of last year, government data show. If the trend lasted through 2012, it will be the highest level of self-sufficiency since 1991.

Before it's here, it's on the Bloomberg Terminal.