Dec. 17 (Bloomberg) -- Natural gas gained in New York for the first time in three days as forecasts for colder weather in the U.S. Midwest next week signaled increased demand for the heating fuel.
Futures rose 0.2 percent, reversing a 2 percent drop, after a midday government outlook predicted below-normal readings in the central U.S., according to Frontier Weather Inc. There will be very little warming in the rest of the eastern half of the country, in contrast to earlier forecasts, the Tulsa, Oklahoma- based company said.
“Reinstatement of that cold push out of Canada appears to be reviving some of the buying interest,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “Now we see a colder core emerging in the Midwest. That’s the key.”
Natural gas for January delivery rose 0.8 cent to settle at $4.287 per million British thermal units on the New York Mercantile Exchange. Trading volume was 25 percent above the 100-day average at 2:56 p.m. Gas is up 28 percent this year.
The discount for January futures to February widened 1 cent to 1.7 cents. March gas traded 14.1 cents above the April contract, compared with 12.4 cents yesterday.
April $6 calls were the most active options in electronic trading. They were 0.2 cent lower at 1 cent per million Btu on volume of 3,121 at 2:57 p.m. Calls accounted for 77 percent of trading volume.
Gas prices slumped as much as 5.6 percent from a seven- month high of $4.443 on Dec. 13 amid predictions that frigid temperatures over the past two weeks would give way to milder late-December weather across most of the lower 48 states.
The National Weather Service models run at about noon today showed that cities such as Minneapolis and Chicago will be colder in the middle of next week than predicted earlier, said Jim Southard, a meteorologist with Frontier Weather.
“Then the new model run gave some confidence to the idea of some stronger cold getting into the Midwest and Northeast around Dec. 27-29, which could lead to temperatures 15 to maybe 25 degrees colder than normal,” he said.
The low temperature in Chicago on Dec. 25 may be 15 degrees Fahrenheit (minus 9 Celsius), 5 below normal, according to AccuWeather Inc. in State College, Pennsylvania. Minneapolis’s low will drop to 3 degrees on Dec. 30, 7 lower than average.
About 49 percent of U.S. households use gas for heating, says the Energy Information Administration, the Energy Department’s statistical arm.
“It’s winter, so usage is inversely related to the thermometer,” said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami. Given the cold so far this month, “we are probably going to see very two healthy withdrawals this week and probably next week” from gas storage facilities, he said.
U.S. inventories probably dropped by 259 billion cubic feet last week, based on the median of nine analyst estimates compiled by Bloomberg. Estimates range from a decline of 220 billion to a fall of 280 billion. The five-year average for the period is a decrease of 133 billion, EIA data show.
Gas stockpiles totaled 3.533 trillion cubic feet in the week ended Dec. 6, 3 percent below the five-year average. The deficit to the historic norm widened to the most since May 31, according to the EIA.
--Editors: Charlotte Porter, David Marino