Natural Gas Futures Advance Amid Outlook for Mid-February Cold

Natural gas futures climbed in New York for the first time in three days. Forecasters predicted colder-than-normal weather next week that would stoke demand for the heating fuel.

Gas gained after dropping to $3.207 per million British thermal units, the lowest price since Jan. 29. A midday update to the National Weather Service’s Global Forecast System model showed temperatures may be below normal in most of the contiguous U.S. from Feb. 16 through Feb. 20. A morning outlook had shown mostly normal readings.

“We still have a month of winter left and sellers are going to be reluctant to jump in,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “If these indications of seasonal demand have some strength behind them, the market will continue to move higher.”

Natural gas for March delivery rose 0.7 cent to settle at $3.279 per million British thermal units on the New York Mercantile Exchange. The futures are up 32 percent from a year ago. Trading volume was 9.6 percent above the 100-day average for the time of day.

March $3 puts were the most active gas options in electronic trading. They were 0.4 cent lower at 0.8 cent per million Btu on volume of 587 contracts as of 3:12 p.m. Puts accounted for 48 percent of options volume.

April gas traded 6.7 cents above the March contract, compared with 6.5 cents on Feb. 8.

Below Normal

The low in New York on Feb. 16 may be 23 degrees Fahrenheit (minus 5 Celsius), 6 below normal, according to AccuWeather Inc. in State College, Pennsylvania. The low in Chicago may be 19 degrees, 3 less than 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 inventories totaled 2.684 trillion cubic feet in the week ended Feb. 1, 15 percent above the five-year average and 7.8 percent below last year’s stockpiles for the period. The supply surplus to the five-year norm has climbed from 11 percent over the past three report periods.

The EIA increased its estimate last month 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.

Record Production

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 EIA said in the monthly EIA-914 report, released Jan. 31 in Washington.

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 would be the highest level of self-sufficiency since 1991.

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