Natural Gas Gains for Second Day on Forecasts of Colder Weather

Natural gas futures climbed for a second day in New York on forecasts of below-normal temperatures that would boost demand for the heating fuel.

Gas gained 0.2 percent after MDA Weather Services said the weather may be colder than average in the Midwest through Feb. 24. Prices for the heating fuel are above the 200-day moving average, which was $3.101 per million British thermal units today, a bullish technical signal, according to Phil Flynn, senior market analyst at Price Futures Group in Chicago.

“I can testify to the fact that it’s very cold here in Chicago and heating demand is rising,” Flynn said. “Prices have popped so far above the 200-day moving average that we also have some technicians jumping into the gas market.”

Natural gas for March delivery rose 0.7 cent to settle at $3.279 per million Btu on the New York Mercantile Exchange. Prices have advanced 22 percent from a year ago and have rebounded after dropping 3.6 percent last week. Trading volume was 15 percent above the 100-day average at 2:48 p.m.

The April contract traded 5.2 cents above March futures, compared with 5.9 cents yesterday.

March $3.20 puts were the most active gas options in electronic trading. They fell 0.8 cent to 1.6 cents per million Btu on volume of 988 contracts as of 3:05 p.m. Puts accounted for 54 percent of options volume.

The low in Chicago on Feb. 23 may be 22 degrees Fahrenheit (minus 6 Celsius), 2 less than usual, according to AccuWeather Inc. in State College, Pennsylvania. The low in Minneapolis may be 8 degrees, 8 below average.

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.

Spot Gas

Moody’s Investors Service reduced its assumptions for Henry Hub spot gas prices by 25 cents to $3.25 per million Btu for 2013 and by 25 cents to $3.75 for 2014, Terry Marshall, senior vice president of corporate finance for the ratings agency in Toronto, said in an e-mailed report today.

Gas stockpiles will probably end the current winter at high levels to suppress prices throughout the year, the agency said.

Analysts predicted that a government report tomorrow will show a smaller-than-average withdrawal from gas inventories. The EIA’s weekly stockpile data, due at 10:30 a.m. tomorrow in Washington, may show supplies fell by 124 billion cubic feet in the week ended Feb. 15, according to the median of 14 estimates compiled by Bloomberg.

The five-year average change for the week is a decrease of 140 billion, EIA data show. Last year, inventories slid by 155 billion during the period.

Stockpiles totaled 2.527 trillion cubic feet in the week ended Feb. 8. Supplies were 16 percent above the five-year average and 9.7 percent below year-earlier levels.

Shale Gas

Marketed gas production will average a record 70.02 billion cubic feet a day this year, up 1.1 percent from 2012, as output from the Marcellus shale formation in the Northeast grows, the Energy Information Administration said in its monthly Short-Term Energy Outlook, released Feb. 12 in Washington.

Gas prices at the benchmark Henry Hub in Erath, Louisiana, will average $3.53 per million British thermal units in 2013, compared with $2.75 per million Btu last year, the agency said.

Stockpiles of the fuel may total about 2 trillion cubic feet at the end of March, down from 2.477 trillion at the same time last year, according to 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.