Natural-gas futures headed for the first weekly gain since Jan. 24 in New York as frigid U.S. weather spurs demand for heating fuel, sending inventories to a 10-year seasonal low.
A government report yesterday showed stockpiles tumbled 237 billion cubic feet to 1.686 trillion cubic feet in the week ended Feb. 7, the biggest February drop since 2007. A winter storm brought snow, sleet and ice to the East Coast after cutting power to more than half a million customers from Arkansas to New Jersey.
U.S. gas stocks are the lowest for this time of year since 2004, even as rising output from shale deposits pushes production to record levels. Gas output in 2014 may climb 2.2 percent, gaining for a ninth consecutive year. Prices climbed 11 percent this week.
“Storage has just been getting machine-gunned with these big withdrawals,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “The market has been surprised by this supply tightness in an environment where we supposedly have so much gas that we don’t know what to do with it.”
Natural gas for March delivery rose as much as 2.7 percent in today’s electronic trading after adding 8.3 percent yesterday to $5.223 per million British thermal units on the New York Mercantile Exchange, the biggest daily gain since Feb. 4. The futures traded at $5.327 as of 9:40 a.m. in London on volume 83 percent above the 100-day average.
Gas is up 26 percent in 2014, the second-biggest gain after coffee in the Standard & Poor’s GSCI index of 24 commodities.
Yesterday’s storage drop was 46 percent bigger than the five-year average for the week, department data show. A deficit to five-year average inventory levels widened to a record 27 percent from 22 percent the previous week. Supplies were 34 percent below year-earlier inventories, also an all-time high.
“This latest string easily totals the largest cumulative three-week draw dating back to when the EIA began tracking the data in 1994,” Mike Tran, an analyst at CIBC World Markets in New York, said in a note to clients yesterday.
Gas stocks at the end of March, when the heating season draws to a close, will drop to 1.33 trillion cubic feet, the lowest level since 2008, the Energy Information Administration said Feb. 11 in its monthly Short-Term Energy Outlook. The EIA is the Energy Department’s statistical arm.
January was the coldest start to a year since 2001, the National Oceanic and Atmospheric Administration said in a report today. About 49 percent of U.S. households use gas for heating, with the biggest share in the Midwest, according to the EIA.
The National Weather Service predicted as much as 16 inches (41 centimeters) of snow for New York, along with wind gusts of 35 miles an hour (56 kilometers an hour) before the storm system moves out of the region.
Commodity Weather Group LLC in Bethesda, Maryland, forecast colder-than-normal weather on the East Coast and in the Great Lakes region through Feb 17.
The low in New York on Feb. 16 may be 17 degrees Fahrenheit (minus 8 Celsius), 12 less than usual, according to AccuWeather Inc. in State College, Pennsylvania. Cleveland temperatures may fall to 16 degrees Fahrenheit, 10 below average.