Natural Gas Advances as Late-December Chill May Spur Demand

Natural gas futures gained for a second day in New York on forecasts for frigid late-December weather that would stoke demand for the heating fuel.

Temperatures may be below normal in parts of the Midwest from Dec. 25 through Dec. 29 after mild weather this week, according to MDA Weather Services in Gaithersburg, Maryland. The low in Minneapolis on Dec. 28 may be 1 degree Fahrenheit (minus 17 Celsius), 8 less than average, said AccuWeather Inc.

“We’re seeing more substantial cold taking hold in the 11-to 15-day forecast,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “Friday’s rally was in anticipation of this temperature shift, and now we’re seeing some follow-on buying.”

Natural gas for January delivery rose 1.7 cents, or 0.5 percent, to $3.812 per million British thermal units at 9:18 a.m. on the New York Mercantile Exchange. Volume for all futures traded was 18 percent above the 100-day average. Prices are down 10 percent this year.

About 49 percent of U.S. households use gas for heating, according to the U.S. Energy Information Administration. The agency is the Energy Department’s statistical arm.

By the end of last winter, the coldest since 1982 by a measure of heating demand, gas inventories were a record 55 percent below five-year average supplies after beginning the season at a small surplus. Gas surged to $6.493 per million British thermal units on Feb. 24, a five-year high.

Natural gas stockpiles were 9.5 percent below the five-year average in the week ended Dec. 5, the biggest deficit for the time of year since at least 2005. Inventories totaled 3.359 trillion cubic feet, compared with 3.545 trillion at the same time last year, EIA data show.

Supplies may reach 1.431 trillion cubic feet by the end of the winter heating season, the agency said Dec. 9 in its monthly Short-Term Energy Outlook report. Gas demand may climb 3.2 percent this year to 73.87 billion cubic feet a day, driven by industrial consumers.

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