Natural Gas Gains for Third Day as Weather View Turns Colder

Feb. 6 (Bloomberg) -- Natural gas futures advanced for a third day in New York, climbing to the highest price in more than a week. Forecasts showed colder-than-normal weather that would boost demand for the heating fuel.

Gas gained 0.6 percent after Commodity Weather Group LLC predicted a Northeast snowstorm later this week and below- average temperatures in most of the lower-48 states from Feb. 16 through Feb. 20. An earlier outlook showed warmer-than-usual readings in parts of the eastern U.S. The futures have rebounded after dropping 4.2 percent last week.

“This is basically a weather event for the gas market,” said Tom Doremus, an analyst at Tradition Energy in Stamford, Connecticut. “We have a winter storm coming over the weekend and the market couldn’t break further to the downside.”

Natural gas for March delivery increased 1.9 cents to $3.418 per million British thermal units on the New York Mercantile Exchange, the highest settlement price since Jan. 25. Trading volume was 6.2 percent below the 100-day average at 3:19 p.m. The futures have risen 34 percent from a year ago.

March $3.70 calls were the most active gas options in electronic trading. They were 0.5 cent higher at 2.4 cents on volume of 652 contracts as of 5:11 p.m. Calls accounted for 52 percent of options volume.

April gas traded 4.6 cents above the March contract, compared with 5.1 cents yesterday.

Colder Weather

The low in Cleveland on Feb. 19 may be 20 degrees Fahrenheit (minus 7 Celsius), 7 below normal, according to AccuWeather Inc. in State College, Pennsylvania. The low in Chicago may be 22 degrees Fahrenheit, 1 less than the usual reading.

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.

New York City and the U.S. Northeast may get snow later this week from a storm that will develop off the East Coast, according to the National Weather Service.

The exact amount of precipitation will depend on the track the storm takes and how fast it grows as a second system weakens over the Great Lakes, Dan Hoffman, a meteorologist with the agency in Upton, New York, said in a phone interview. It should arrive late on Feb. 7 and end before daybreak on Feb. 9.

Government data scheduled for release at 10:30 a.m. tomorrow may show that gas stockpiles fell by 125 billion cubic feet in the week ended Feb. 1, according to the median of 18 analyst estimates compiled by Bloomberg. The five-year average decline for the period is 165 billion, EIA data show.

Gas inventories totaled 2.802 trillion cubic feet in the week ended Jan. 25, 12.2 percent above the five-year average and 6.7 percent below last year’s stockpiles for the period.

Gas Prices

The EIA last month increased its estimate for 2013 natural gas prices, citing more normal winter heating demand compared with last year. Gas prices at the benchmark Henry Hub in Erath, Louisiana, will average $3.74 per million British thermal units, compared with the previous estimate of $3.68 and $2.75 in 2012, according to the Jan. 8 Short-Term Energy Outlook.

Natural gas production in the lower-48 states rose to a record in November as more of the fuel was pumped from shale wells in the Northeast.

Output increased 0.6 percent to 73.88 billion cubic feet a day from a revised 73.47 billion in October, the Energy Department’s Energy Information Administration said in the monthly EIA-914 report, released Jan. 31. The report covers gross gas withdrawals, which include amounts used to maintain pressure and quantities vented and flared.

Shale Wells

Supplies from the “other states” category rose 1.4 percent to 24.29 billion cubic feet a day from a revised 23.96 billion in October. Production advanced as “some operators reported new wells coming online in the Marcellus shale play,” the EIA said in 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, on pace to be the highest annual level since 1991, government data show.

--With assistance from Brian K. Sullivan in Boston. Editors: Bill Banker, Charlotte Porter