Natural Gas Advances on Outlook for Above-Normal Supply Drop


images (1)Natural gas futures climbed in New York for the first time in five days on speculation that government data will show a bigger-than-normal decline in stockpiles of the heating fuel as cold weather stoked demand.

Gas gained 5.4 percent. An Energy Information Administration report on Feb. 13 may show that inventories slid by 234 billion cubic feet last week, compared with the five-year average decrease of 162 billion, according to the median of seven analyst estimates compiled by Bloomberg. Supplies totaled 1.923 trillion as of Jan. 31, the lowest for that period since 2004, EIA data show.

“We’re going to see a plus-200 billion cubic foot withdrawal this week and next week, and the selling pressure has evaporated,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The market finally found the big supply picture, which is that we’re at a 10-year low in storage levels.”

Natural gas for March delivery rose 24.5 cents to settle at $4.824 per million British thermal units on the New York Mercantile Exchange. Trading volume was 13 percent above the 100-day average at 2:50 p.m. The futures are up 14 percent this year.

March gas traded 25.4 cents above the April contract, compared with 17.3 cents yesterday.

March $5.25 calls were the most active options in electronic trading. They were 6.5 cents higher at 14.7 cents per million Btu on volume of 1,712 at 2:58 p.m. Calls accounted for 65 percent of trading volume.

Options Volatility

Implied volatility for March at-the-money options was 65.29 percent at 2:45 p.m., compared with 32.22 percent a month ago.

Gas stockpiles were 22.4 percent below the five-year average as of Jan. 31 and 28.8 percent lower than year-earlier supplies.

The U.S. cut its inventory outlook for the end of March to 1.33 trillion cubic feet, the lowest end-of-season stockpile level since 2008, from 1.54 trillion, the EIA, the Energy Department’s statistical arm, said today in its monthly Short-Term Energy Outlook. The agency increased its estimate for the average gas price in 2014 to $4.17 per million Btu from $3.89.

Gas production declines caused by cold weather totaled 88.4 billion cubic feet from Dec. 5 to Feb. 6, according to LCI Energy Insight in El Paso, Texas. The so-called well freeze-offs occur when water produced with natural gas crystallizes and blocks pipeline flows.

Freezing Wells

“Front month upward potential lies in significant freeze-offs being revealed in the next two storage reports and another possible cold snap in the Midwest,” Aaron Calder, an analyst at Gelber & Associates in Houston, said in a note to clients today.

Ice, sleet and snow falling across the U.S. South is forecast to sweep through the Northeast later this week, bringing New York and other cities another dose of winter.

Snow and ice spreading into North and South Carolina will move northward late today and tomorrow, said Rob Carolan, owner of Hometown Forecast Services Inc. in Nashua, New Hampshire.

A more powerful storm will develop off the North Carolina coast tomorrow, Carolan said. An area from westernVirginia through Pennsylvania north to Albany, New York, and then across to New England may get as much as 6 inches of snow, he said.

Colder Weather

Commodity Weather Group LLC in Bethesda, Maryland, predicted colder-than-normal weather in the eastern half of the U.S. through Feb. 15.

The low in Cleveland on Feb. 14 may be 10 degrees Fahrenheit (minus 12 Celsius), 16 less than usual, according to AccuWeather Inc. in State College, Pennsylvania. Minneapolis temperatures may fall to 1 degree, 11 below average.

Commodity Weather said January was the coldest first month of the year in the contiguous U.S. since 1994 in terms of gas-weighted heating degree days, a measure of energy demand. About 49 percent of U.S. households use gas for heating, with the biggest share in the Midwest, according to the EIA.

Sempra Energy (SRE) won conditional U.S. approval to export 1.7 billion cubic feet of liquefied natural gas a day from a terminal in Cameron Parish, Louisiana, the Energy Department said today.

The department has now approved six applications to export liquefied natural gas to nations that lack a free-trade agreement with the U.S. Sempra’s application is subject to an environmental review and final regulatory approval, the department said.

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