Natural Gas Gains as Frigid Weather Into March to Stoke Demand

Natural gas futures rose for the fourth time in five days in New York as a deep freeze across the eastern half of the U.S. was seen extending into next week.

Temperatures will be below normal across most of the lower 48 states through March 10, as readings from the Northeast to Texas may be 15 degrees lower than average over the next five days, said MDA Weather Services. Gas stockpiles probably fell by more than the five-year norm for the first time in five weeks, based on analyst estimates compiled by Bloomberg.

“This is some pretty cold weather over most of the United States now and calls are for it to remain cold,” said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami. “If this weather continues and we are withdrawing more than 200 bcf per week over the next three weeks, that will put a pretty big dent in storage.”

Natural gas for March delivery rose 2.3 cents, or 0.8 percent, to settle at $2.902 per million British thermal units on the New York Mercantile Exchange. Prices have dropped 25 percent since the heating season began in November.

May $3.50 calls were the most active options in electronic trading. They fell 0.6 cent to 4.3 cents on volume of 2,063 contracts at 2:56 p.m. March $3 Calls fell 0.9 cent to 0.1 cent on volume of 873. March options expired Tuesday.

“There was a large amount of $3 puts on the books; that may be one reason why we may hover around $3 or just under the $3 level,” Saal said.

Minneapolis Low

The low temperature in Minneapolis on Feb. 26 may drop to minus 5 degrees Fahrenheit (minus 21 Celsius), 22 below normal, according to AccuWeather Inc.’s website. Boston’s reading will drop to 8, 19 lower than average. About 49 percent of U.S. households use gas for heating.

The number of heating-degree days, a measure of weather-driven energy demand, will total 950 this month, 7.9 percent higher than last February, Commodity Weather Group LLC said in a seasonal outlook Tuesday. Demand for the heating season from November through March will fall short of the previous heating season by 3.9 percent.

Gas stockpiles probably fell by 242 billion cubic feet last week, according to the median of four analyst estimates compiled by Bloomberg. Estimates ranged from drops of 233 billion to 257 billion. The five-year average decline for the period is 131 billion. The U.S. Energy Information Administration is scheduled to release its weekly storage report on Feb. 26.

Record Demand

Demand for the heating and power-plant fuel jumped to 123.9 billion cubic feet on Feb. 19, the most since Jan. 9 and a record for any February day, according to LCI Energy Insight data going back to 2006.

Frigid weather causing wells and pipelines to freeze have reduced cut gas production by about 1.2 billion cubic feet a day, Genscape Inc. said in a report Tuesday. The largest decline was in Texas, where daily volumes were coming in 652 million cubic feet below the 30-day average.

Inventories totaled 2.157 trillion cubic feet on Feb. 13, 2.8 percent above the five-year average, the EIA said last week. Record production and a milder winter than last year helped supplies rebound from a record deficit of 55 percent last March.

“Undeniably, the frigid conditions unfolding across much of the country this month have compelled traders to reconsider end-of-season inventory estimates, with the consensus outlook for end-March stock levels falling from 1.7 tcf last month to roughly 1.4 tcf,” Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York, said in a report to clients. “Commercial hedging might likely limit the near-term prospects of an extended rally this month.”

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