March 13 (Bloomberg) -- Natural gas futures climbed in New York for the fourth time in five days, reaching a three-month high, on speculation that unusually cold weather heading into spring will spur heating demand.
Gas gained 1 percent as Commodity Weather Group LLC predicted below-normal temperatures sweeping from the Dakotas into the Northeast from March 23 through March 27. The government tomorrow may report an above-average stockpile drop because of cold weather last week, analyst estimates show.
“The cold temperatures, especially in the Midwest, are giving this market a boost,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “I’m expecting an above-average drawdown and the cold temperatures are adding to demand.”
Natural gas for April delivery rose 3.5 cents to settle at $3.68 per million British thermal units on the New York Mercantile Exchange, the highest closing price since Dec. 5. Trading volume was 11 percent below the 100-day average at 3:34 p.m. Prices have climbed 9.8 percent this year.
The discount of April contracts to October, a gauge of summer demand for gas, narrowed 0.9 cent to 17 cents, the smallest gap since Nov. 23. The discount over the past month has been at its smallest compared with any April-October spread for the same period going back to 2004.
June $4.55 calls were the most active gas options in electronic trading. They rose 0.3 cent to 1.8 cents per million Btu on volume of 1,620 contracts as of 3:38 p.m. Calls accounted for 58 percent of options volume.
Implied volatility for at-the-money gas options expiring in April was 33.32 percent, unchanged from yesterday. May options volatility was 30.32, also unchanged.
The low temperature in Chicago on March 26 may be 31 degrees Fahrenheit (minus 1 Celsius), 3 lower than the usual reading, according to AccuWeather Inc. in State College, Pennsylvania. Washington’s low may be 5 below normal at 35 degrees.
A midday update to the National Weather Service’s Global Forecast System model also showed colder-than-average weather in the Midwest and parts of the eastern U.S. from March 18 through March 22.
About 50 percent of U.S. households use gas for heating, according to the Energy Information Administration, a division of the Energy Department. Gas demand typically slumps between the peak heating-demand season and before hot weather drives power demand to run air conditioners.
Output from U.S. nuclear plants fell 1.3 percent to 83,334 megawatts today, or 82 percent of capacity, the least since Dec. 1, according to U.S. Nuclear Regulatory Commission data compiled by Bloomberg. Production has fallen 13 percent from this year’s high reached on Feb. 1.
Reactor maintenance shutdowns, usually undertaken in the U.S. spring or fall, when energy use is lowest, may increase consumption of natural gas and coal to generate electricity.
Gas inventories probably fell by 137 billion cubic feet in the week ended March 8, based on the median of 17 analyst estimates compiled by Bloomberg. The five-year average drop from the week is 74 billion, according to the EIA. Supplies dropped 66 billion a year earlier as an unusually mild winter reduced demand for the fuel.
U.S. stockpiles totaled 2.083 trillion cubic feet in the week ended March 1, 14.8 percent below year-earlier levels, the biggest deficit since July 2008, the EIA reported last week. A supply surplus to the five-year average narrowed to 14.8 percent from 16 percent.
Marketed gas production will average a record 69.6 billion cubic feet a day this year, down from 70.02 billion estimated in February, the Energy Information Administration said in its monthly Short-Term Energy Outlook, released yesterday in Washington. Output will rise 0.7 percent from 2012.
Cold weather has reduced output during the winter as water produced with gas crystallizes and blocks flows from wells.
“As natural gas production in the United States shifts inland, well freeze-offs have become a greater supply disruption risk during the winter,” the EIA said in the report.
Inventories of the fuel may be “just under” 2 trillion cubic feet at the end of March, compared with 2.477 trillion for the same period last year, according to the report.
Exxon Mobil Corp., the largest U.S. oil company, said North America may be able to export 15 percent of its natural gas output and 5 percent of its oil by 2040 as the region’s production surges and demand stalls.
North America probably will become a net energy exporter by about 2025, after importing 35 percent of its oil in 2010, Irving, Texas-based Exxon said in an energy outlook report released today.
--With assistance from Edward Klump in Houston. Editors: Bill Banker, Charlotte Porter